Coinbase’s chief legal officer, Paul Grewal, emphasized that users’ assets are legally and physically protected.
As concerns about the Coinbase exchange spread, Coinbase’s chief legal officer, Paul Grewal, assured consumers that their cash remain secure within the exchange.
In a May SEC filing, Coinbase stated that in the event of bankruptcy, crypto-assets kept in custody on behalf of its customers may be “subject to bankruptcy proceedings,” and customers may become “unsecured creditors” in the process.
The disclosure came shortly after Coinbase disclosed $430 million in losses in the first quarter of 2022, as well as a 27 percent decline in sales compared to the previous year. To make matters worse, the news broke just as Coinbase’s trash bonds began to lose value.
As rumors about the company’s insolvency spread on social media, Coinbase’s chief legal officer corrected and explained the situation in a blog post published on Thursday.
Grewal claims that the exchange secures consumers’ assets “both legally and physically.” The firm’s chief legal officer also stated that the Retail User Agreement has been modified to offer the bankruptcy protections of institutional clients to retail investors as well.
Grewal further stated that the company does not take any action with its clients’ assets until the consumers directly request it to do so. This includes lending or any other commercial activity carried out by traditional banks.
There’s never been a serious question that assets on @coinbase are safe. We have more than $6B in the bank, are financially strong, and have legal and operational protections for customers to invest, access, and withdraw their crypto.
— paulgrewal.eth (@iampaulgrewal) June 1, 2022
Furthermore, the attorney stated in a tweet that the exchange is “financially robust” and has more than $6 billion in the bank, meaning that, despite the “FUD,” it will not go bankrupt very soon.
Brian Armstrong, the co-founder, and CEO of Coinbase, also spoke on the matter in May. The CEO emphasized that the company faces “no risk of bankruptcy,” and that the language was only introduced to comply with a new SEC regulation. In any case, he underlined that its consumers are protected by rigorous legal safeguards.