"Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors"
That's from Coinbase's 10-Q filing (https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...). I don't necessarily think it's likely that customers would be treated as unsecured creditors, but it is possible as they note. At the very least, it seems likely that a court would need to determine (over the course of months) whether to release the crypto assets to the account holders. It seems likely that it wouldn't be as orderly as a traditional broker going out of business given that it's new ground to litigate. I do agree that it probably should be treated like any other broker, but I think there's a decent chance it'll take some time to work through courts.
Coinbase has $256B in assets on its platform. I think its creditors would certainly see value in trying to claim that the crypto isn't like stocks or bonds held at a brokerage - enough value to tie it up for a good while with appeals.
They also note that the theft or loss of private keys is a risk and they note that the value of crypto assets held by them is far greater than what they're insured for. While I'm sure Coinbase invests a lot in security, there's a lot of risk in transactions that can't be un-done. If an employee transfers money at a bank, the government and banks can un-do the transactions most of the time.
Again, I'm not saying these are likely scenarios, but there's certainly risk as a Coinbase customer.
That's from Coinbase's 10-Q filing (https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...). I don't necessarily think it's likely that customers would be treated as unsecured creditors, but it is possible as they note. At the very least, it seems likely that a court would need to determine (over the course of months) whether to release the crypto assets to the account holders. It seems likely that it wouldn't be as orderly as a traditional broker going out of business given that it's new ground to litigate. I do agree that it probably should be treated like any other broker, but I think there's a decent chance it'll take some time to work through courts.
Coinbase has $256B in assets on its platform. I think its creditors would certainly see value in trying to claim that the crypto isn't like stocks or bonds held at a brokerage - enough value to tie it up for a good while with appeals.
They also note that the theft or loss of private keys is a risk and they note that the value of crypto assets held by them is far greater than what they're insured for. While I'm sure Coinbase invests a lot in security, there's a lot of risk in transactions that can't be un-done. If an employee transfers money at a bank, the government and banks can un-do the transactions most of the time.
Again, I'm not saying these are likely scenarios, but there's certainly risk as a Coinbase customer.