In recent days, at the same time as the earthquake about the collapse of the two famous cryptocurrencies UST and LUNA, the technology and digital world are still buzzing with information about the possibility of bankruptcy of the exchange. America’s largest cryptocurrency, Coinbase.
This stems from a 10-Q filing by the company with the U.S. Securities and Exchange Commission (SEC) that mentions the risk factors for crypto investors’ crypto assets in the market. Coinbase bankruptcy – although Brian Armstrong, CEO of Coinbase emphasized that bankruptcy is very unlikely.
This is also the first time this risk factor has been mentioned by the company in its report to the SEC.
Brian Armstrong, CEO of Coinbase
Along with that was a series of other adverse events when Coinbase’s last quarter report also failed to meet key business goals, as well as the collapse of the famous cryptocurrency LUNA and its associated stablecoin. , UST. Not only that, the decline of BTC to the lowest level in more than 9 months now makes many people panic and believe in the possibility of bankruptcy of the largest US cryptocurrency exchange today.
In fact, only now did Coinbase announce this bankruptcy risk because of a new SEC requirement called SAB 121 – a form of disclosure document for public companies holding crypto assets. encryption for other third parties.
According to the SEC, “due to the idiosyncrasies of the asset class and the lack of legal precedent“, crypto-holders must disclose how these assets are handled in the event of legal disputes such as fraud, loss, theft, or bankruptcy.
This means that the information sheet a company submits to the SEC must respond to a common form set forth by the Commission, including answering questions about how crypto assets should be handled in the event of a company bankruptcy. produce. That’s why Coinbase talked about the possibility of bankruptcy in its recent report – which is completely normal and reasonable under the law – it is certainly not an indication of the company’s likelihood of bankruptcy in the near future. this company.
In fact, nearly any company is likely to go bankrupt, but as the largest cryptocurrency exchange in the US today, Armstrong emphasized that this possibility is very unlikely. If it does, it can only happen in “Black Swans” situations – highly traumatic and unpredictable events that fall outside the range of normal expectations.
In those cases, the company said: “Because holding crypto assets is viewed as ownership of assets in bankruptcy, in the event of bankruptcy, crypto assets held by us on behalf of clients may be the target. of the bankruptcy process and such customers may be treated as our unsecured creditors.”
This means users may lose access to these assets as they are considered ownership of Coinbase. This is different from the US regulation, where depositors are insured up to $250,000 per account in the event of a bankruptcy of the bank they are sending money to.
Although there is nothing unusual in Coinbase’s announcement, it is clear that when the cryptocurrency market is on the decline, investor psychology is also prone to panic and sensitive to any information.
Check out MarketWatch
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