The Coinbase crypto exchange platform is not doing well. In the event of bankruptcy, customers may not get their money back.
Coinbase is doing badly. On Tuesday, the Nasdaq-listed crypto exchange platform published its financial results for the first quarter of 2022. The least we can say is that the results are not up to par. As the company recorded a net income of $1.60 billion last year, the figures fell to just $1.17 billion between January and April. The number of transactions has also dropped drastically, with a total volume estimated at 309 billion for 9.2 million active users, compared to 335 billion and 11.4 million users in 2021.
Will Coinbase Go Bankrupt?
According to the company, these declining figures are explained by several correlated factors, ranging from its entry on the Nasdaq in April 2021, to a complicated economic context for cryptocurrencies, the price of which was strongly impacted by the Russian-Ukrainian war. In its press release, the firm explains: “These market conditions had a direct impact on our first quarter results. But we have approached these market conditions with foresight and preparation, and we remain more excited than ever about the future of cryptocurrencies.”
From the top of its 10 years of existence, Coinbase therefore does not plan to go bankrupt. The company also considers that its poor quarterly results have “not permanent“, and that it is considering a long-term growth plan, based in particular on its recent arrival on the NFT market, with the launch less than a month ago of its marketplace dedicated to non-fungible tokens.
Are customers at risk of bankruptcy?
Even more than the possible collapse of Coinbase, the platform’s customers are mainly worried about the future of their crypto portfolio in the event of bankruptcy. It must be said that in its quarterly report filed with the SEC, the firm is not particularly reassuring. In particular, it indicates that the assets deposited by its clients: “could be treated as assets subject to bankruptcy proceedings and customers could be treated as general unsecured creditors”.
1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe at Coinbase, just as they’ve always been.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
Concretely, this means that if Coinbase is declared bankrupt, his clients’ money could also disappear. In the context of a receivership, the cryptoassets present in user accounts could indeed be used to reimburse the company’s creditors. A worrying situation, which logically prompted some to withdraw their assets from the platform. For his part, the boss of the firm Brian Armstrong spoke on Twitter to reassure the crowds, assuring: “Your funds are safe at Coinbase, as they always have been. (…) We run no risk of bankruptcy”.
Despite its reassuring words, the company nevertheless admits to having poorly explained the protective measures related to a potential bankruptcywhich would especially impact certain users who do not benefit from a premium service offering solid legal guarantees. “We should have updated our retail terms earlier,” concedes Brian Armstrong.