Coinbase warns that bankruptcy could wipe out user funds • Hacker News Board

Re: Coinbase warns that bankruptcy could wipe out user funds

#191

Post by thr0wawayf00 » Wed, May 11, 2022, 2:31 PM UTC

jpmattia wrote: post #177

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

> Since coinbase isn’t FDIC insured, The Fortune article in the HN link is writing only about the crypto assets, which lack FDIC insurance. Cash assets are FDIC insured. From Coinbase: "To the extent U.S. customer funds are held as cash, they are maintained in pooled custodial accounts at one or more banks insured by the FDIC." https://help.coinbase.com/en/coinbase/other-topics/legal-pol...

yeah but why on earth would you store cash in Coinbase? Are you even getting a savings account interest rate on that?

Re: Coinbase warns that bankruptcy could wipe out user funds

#192

Post by cm2187 » Wed, May 11, 2022, 2:32 PM UTC

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

FDIC insurance is for banks, not brokers. I think what protects you from a broker going bust is the separation of client money from firm money. Though I think that separation failed in the most recent major broker bankruptcy (MF Global) and probably many others. FDIC would protect the broker against its own bank going bust (though I am sure there are guarantee caps).

Re: Coinbase warns that bankruptcy could wipe out user funds

#193

Post by formerkrogemp » Wed, May 11, 2022, 2:33 PM UTC

Forgeties79 wrote: post #185

eatonphil wrote: post #4

Earlier quoted context omitted.

I do wonder why he's allowed to say on Twitter there is no risk of bankruptcy [0]. While the risk could be minimal and maybe negligible saying "no risk" means zero chance. That can't be true of any company. For a public company ceo to say that, isn't that securities fraud? I guess even if it is fraud and they do get prosecuted by the SEC they'd just get fined for it. And maybe the fine here would be much less than th…

If I was a CEO and saw how few and far between (as well as toothless) the repercussions have been for Elon Musk, I wouldn’t fear tweeting whatever I wanted either.

If you were a CEO, you'd often be set up for life with some level of financial prudence, and everything else after achieving that level of wealth seems like it'd just be for a lark or some pursuit of satisfaction/happiness.

Re: Coinbase warns that bankruptcy could wipe out user funds

#194

Post by shoulderfake » Wed, May 11, 2022, 2:33 PM UTC

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

No post body was provided.

Re: Coinbase warns that bankruptcy could wipe out user funds

#195

Post by tablespoon » Wed, May 11, 2022, 2:33 PM UTC

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

> Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security.

Is Coinbase "loaning" out the Bitcoin users have deposited in it?

The reason banks need the FDIC is that they loan your deposits out instead of throwing it in a vault and sitting on it, so if they go under they don't have those assets to distribute in a bankruptcy. Given how immature and non-economic cryptocurrency is, it wouldn't surprise me if Coinbase was sitting on all/most of its users desposits. So it's possible the users might get most of their deposits back after a bankruptcy proceeding (assuming the reason wasn't massive theft of assets or something).

Re: Coinbase warns that bankruptcy could wipe out user funds

#196

Post by duxup » Wed, May 11, 2022, 2:33 PM UTC

maccard wrote: post #148

duxup wrote: post #117

Earlier quoted context omitted.

I don't think regulatory capture is the issue here. We're talking about a disclosure of risks ... that seems reasonable to me. Dude says there is no risk of bankruptcy and is predicting court case outcomes... and it is clearly in his financial interest to make the arguments he is making. The system is rigged and other truthy arguments are all but standard operating procedure for whatever crytpo idea someone comes up…

The problem is that the disclosure of risks is written in such a way that captures the existing situatio nand makes it hard for a valid crypto firm to not post... exactly this. > The system is rigged and other truthy arguments are all but standard operating procedure for whatever crytpo idea someone comes up with. But remember that applies to both sides of the coin - the SEC disclosure of risks claiming there's a hug…

>The problem is that the disclosure of risks is written in such a way that captures the existing situatio nand makes it hard for a valid crypto firm to not post... exactly this.

Because ... they aren't FDIC insured nor do they provide any reliable protections for their user's money?

It's hard not to post it, because it is true.

Re: Coinbase warns that bankruptcy could wipe out user funds

#197

Post by junofan » Wed, May 11, 2022, 2:35 PM UTC

dboreham wrote: post #160

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

> it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well Others have said this, but just to reiterate : this is quite wrong. This is like saying that because you hold Amazon stock via a Schwab brokerage account, if Schwab were to declare bankruptcy, then you would lose your Amazon stock. Needless to say that wouldn't happen because you are the owner of the stock, not Schwab. FDIC…

You might wanna check the fine print on your Schwab brokerage account.

Re: Coinbase warns that bankruptcy could wipe out user funds

#198

Post by tablespoon » Wed, May 11, 2022, 2:35 PM UTC

sureglymop wrote: post #50

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

What i don't understand is why don't people create their own wallet and keep their funds there? Isn't that the entire purpose? Of course they could still use coinbase as an exchange. But if everyone let's another party "manage" their wallet in what way is it really decentralized...

> What i don't understand is why don't people create their own wallet and keep their funds there? Isn't that the entire purpose? Of course they could still use coinbase as an exchange. But if everyone let's another party "manage" their wallet in what way is it really decentralized...

The real purpose of Bitcoin is to speculate on the roller coaster. Everything else is basically woo that's needed to fuel it. The "future of money" where people by their coffee with a super-secure private wallet is a lie.

Re: Coinbase warns that bankruptcy could wipe out user funds

#199

Post by pjbeam » Wed, May 11, 2022, 2:37 PM UTC

CyanDeparture wrote: post #161

Can anyone tell me how to set up a wallet on my Mac in order to get my coins off coinbase. Is there any clear guide on how to do that. Every link on Google seems to be spam or downloading potentially malicious software. It's very fustrating because so many people seem to know how to set up a wallet on their computer/Mac however I cannot for the life of me find a clear wallet to download and move my funds to or a guid…

Why can't you download this in the UK? My question is sincere, I'm surprised to read that.

Re: Coinbase warns that bankruptcy could wipe out user funds

#200

Post by cyberlurker » Wed, May 11, 2022, 2:38 PM UTC

capableweb wrote: post #140

etimberg wrote: post #78

I wonder if this will cause them to go bankrupt because users get scared and leave. Just like Bear Stearns in 2008

I don't think Coinbase can go bankrupt because users leave the platform. They would go bankrupt because of mismanaged funds in that case. Let's say all users withdraw their fiat currencies and also cryptocurrencies, Coinbase will still have money in their own bank for sure, unless they store their own money on their platform, which is highly unlikely. Even if 100% users withdraw 100% of their funds, Coinbase takes a…

They don't have 100% of the funds on hand, same as most real banks.