Coinbase founder and CEO Brian Armstrong said that mentioning the company’s possible bankruptcy in its filings with the U.S. Securities and Exchange Commission (SEC) is a new requirement of the regulator.
“Because crypto assets in custody may be considered bankruptcy assets, in the event of bankruptcy, cryptocurrency assets we hold on behalf of our customers may be subject to bankruptcy proceedings and such customers may be deemed unsecured creditors of ours,” Coinbase said.
The company added that customers may now perceive holding assets on the platform to be “more risky,” which would significantly affect the exchange’s financial position.
In the event of a Coinbase bankruptcy, the unsecured creditor would be the most vulnerable, as their claims would be the last to be considered.
Nevertheless, customers have no reason to worry because their assets are as protected as before, Armstrong said.
“We believe our Prime and Custody service customers are well protected legally, even in the event of a black swan like this,” Armstrong wrote in a tweet.
Coinbase shares are trading at $72, down 70% from the start of the year.