The Chief Legal Officer of Nasdaq-listed cryptocurrency exchange Coinbase (NASDAQ: COIN) has explained to the cryptocurrency community why users’ funds are safe, despite all the fear, uncertainty, and doubt (FUD) being spread over a recent disclosure.
In a blog post accompanied by a Twitter thread, Grewal noted that Coinbase’s disclosure that came in a 10Q report “created some noise about how Coinbase holds crypto assets” and what could happen to them in the “highly unlikely event of the company’s insolvency.”
Grewal clarified that the company has “more than $6B in the bank” and is financially strong, while having “legal and operational protections for customers to invest, access, and withdraw their crypto.”
In his post, Grewal noted that “customers assets have always been protected,” and highlighted that the firm maintains internal systems to keep track of customer funds. It adds that its “fully audited ledger identifies your account, your fiat and crypto holdings, and tracks your account activity in real time.”
Per Grewal, there’s never a situation in which user funds are confused with corporate assets. Moreover, he clarified that Coinbase does not repurpose user funds, as it doesn’t lend them out or take any action unless specifically instructed to do so.
Coinbase’s Chief Legal Officer added that while some banks and financial institutions “use customer funds for commercial purposes” and “often hold only a fraction of their customer assets at any given time,” Coinbase holds customer assets in full and keeps them available for transfer.
He noted the firm recently updated its Retail User Agreement to expressly highlight the same legal protection included for institutional clients in the event of a custodian bankruptcy, and added:
This is not a change in how we do business. We believe that digital assets in our custody have always been Article 8 financial assets, but have clarified this so that there will not be any doubt.
Coinbase’s 10Q report came shortly after the company reported a net loss of $430 million in the first quarter of the year, compared to a profit of $840 million in the fourth quarter of 2021. The company’s revenue in Q1 was $1.17 billion, compared to analysts’ average estimate of $1.5 billion.
As reported Owen Lau, an equity researcher at Oppenheimer, has estimated that the Nasdaq-listed cryptocurrency exchange Coinbase could have “hidden value” in its Coinbase Ventures unit.
The research analyst estimated that Coinbase’s Ventures portfolio may be worth up to $6.6 billion and noted that while they aren’t yet contributing financially to the exchange they are “strategically important to the firm.”
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The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.