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

Re: Coinbase warns that bankruptcy could wipe out user funds

#221

Post by 2OEH8eoCRo0 » Wed, May 11, 2022, 2:50 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…

It's funny but if crypto really does crash you can bet that all of us will be paying for it one way or another.

Re: Coinbase warns that bankruptcy could wipe out user funds

#222

Post by kristopolous » Wed, May 11, 2022, 2:50 PM UTC

matwood wrote: post #72

skilled wrote: post #21

Wait, can someone explain to me why they would explicitly announce it like this? This almost sounds like they're expecting to go bankrupt, or have plans to close the platform. In the last 7 days they have lost over 50% value, and dropping a news bomb like this is only going to make it worse, isn't it?

Read any company annual report and you'll see all sorts of risks listed. Amazon lists war and other geopolitical events for example. This isn't to minimize that bankruptcy is a risk, just that it doesn't mean it is imminent.

They're extremely fun to read sometimes bordering of fantasy and fiction. I don't think I've seen one mentioning the undead crawling their way to the surface from their earthen tombs but I probably just haven't read enough

Rest assured if I ever go public I'll insist on putting a few in there. A battalion of armored octopi marching ashore with undefeatable sea ordnances enslaving humanity by tentacle could prevent us from hitting our quarterly numbers...

I've put so many hidden jokes like that in terms of service and privacy policies over the years.

Re: Coinbase warns that bankruptcy could wipe out user funds

#223

Post by paulpauper » Wed, May 11, 2022, 2:50 PM UTC

AlwaysRock wrote: post #212

So best practice is to continue to hold your coin in a personal wallet and move to an exchance like coinbase when you need to sell?

They will make you do tons of ID verification to sell, take forever.

Re: Coinbase warns that bankruptcy could wipe out user funds

#224

Post by sulam » Wed, May 11, 2022, 2:50 PM UTC

tablespoon wrote: post #205

rileyphone wrote: post #203

Earlier quoted context omitted.

No, but the users would be last in liquidation preference, so would end up screwed anyways.

> No, but the users would be last in liquidation preference, so would end up screwed anyways. Cite please, because if true that would be mind-boggling.

This is literally the topic of the article.

“the exchange noted that in the event it ever declared bankruptcy, “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” Coinbase users would become “general unsecured creditors…”

Re: Coinbase warns that bankruptcy could wipe out user funds

#225

Post by noodles_nomore » Wed, May 11, 2022, 2:52 PM UTC

Coinbase limits withdrawals in times when crypto crashes by removing the 'financial services' header in the settings where your connected bank accounts are listed. I don't know if they still do that, but I saw this as recently as a few months ago. You can still empty your account by going through the account deletion process. It will give you the option to sell all your crypto (and maybe to send it to a wallet, I don't know) and do a full withdrawal. Afterwards you can still stop the deletion process if you think you want to keep the account anyway (e.g. I was worried the transaction would somehow not complete and then not have access to the account).

Re: Coinbase warns that bankruptcy could wipe out user funds

#226

Post by yreg » Wed, May 11, 2022, 2:52 PM UTC

civilized wrote: post #171

yreg wrote: post #106

Earlier quoted context omitted.

A. speculation B. diversification against more tradional assets C. store of value if you don’t have access to any better financial instruments D. keeping some ready on hand to pay off ransomware attacks

All except maybe D also apply to Pokemon cards

Yes, so what?

Re: Coinbase warns that bankruptcy could wipe out user funds

#227

Post by ahmetrcagil » Wed, May 11, 2022, 2:54 PM UTC

mbesto wrote: post #190

sureglymop wrote: post #50

Earlier quoted context omitted.

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...

Would you like to explain to my 70 year old mother that she should install a Chrome extension, transfer her coins to it and expect her not to lose that? Oh and then explain to her that she is going to print out a piece of paper with 12 words on it. That's her backup in case she loses everything...so "Mom, do not lose this piece of paper you're screwed!" Yes she'll figure that out easily!

Maaaybe 70 y.o. moms should not invest in crypto then?

Re: Coinbase warns that bankruptcy could wipe out user funds

#228

Post by jmyeet » Wed, May 11, 2022, 2:54 PM UTC

This isn't an FDIC issue. This is an Securities Investor Protection Corporation ("SIPC") issue. The SIPC was greated almost 50 years ago to cover investors in a similar fashion to FDIC against the loss of custody assets in the case that a broker goes bankrupt. Like FDIC, there are limits.

The point here is that crypto isn't covered by the SIPC [1]. So the Coinbase disclosure (required by the SEC) is correct: there is no protection for your Coinbase custody assets in the cse of insolvency beyond being a general creditor.

This seems like a good thing for investors and customers to know.

[1]: https://www.sipc.org/for-investors/what-sipc-protects

Re: Coinbase warns that bankruptcy could wipe out user funds

#229

Post by iamthirsty » Wed, May 11, 2022, 2:54 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…

> 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.

But that isn't how Coinbase works. They aren't holding a share for you, they are holding your actual assets, with nothing in force that they would have to return them, bar what is in USD.

Re: Coinbase warns that bankruptcy could wipe out user funds

#230

Post by sdenton4 » Wed, May 11, 2022, 2:55 PM UTC

tablespoon wrote: post #205

rileyphone wrote: post #203

Earlier quoted context omitted.

No, but the users would be last in liquidation preference, so would end up screwed anyways.

> No, but the users would be last in liquidation preference, so would end up screwed anyways. Cite please, because if true that would be mind-boggling.

Welcome to capitalism! The billionaires always eat first. And don't you forget it.