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Coinbase warns that bankruptcy could wipe out user funds

fortune.com

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Re: Coinbase warns that bankruptcy could wipe out user funds

#391

Post by maccard »

duxup wrote: post #196
maccard wrote: post #148

Earlier quoted context omitted.

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.

The problem is that there is no alternative statement for them to make. The disclosure of risks require them to be FDIC insured or state there is a risk of loss in bankruptcy, and given they don't have the option of FDIC insurance, they have to declare the risk. The problem is that coinbase don't have the choice to be insured, yet they get labelled as though they're yolo'ing it _whether they are or not_ because the FDIC don't insure the asset class they're trading.

Re: Coinbase warns that bankruptcy could wipe out user funds

#392

Post by its_ethan »

matheusmoreira wrote: post #353
its_ethan wrote: post #345

Earlier quoted context omitted.

I'm not sure who first said it, but crypto feels like a solution in search of a problem. Something akin to "when all you have is a hammer, everything looks like a nail" - forcing crypto/blockchains as solutions to problems that are either already solved, or could be solved in other more traditional ways, only acts as a disservice to wider adoption imo.

> crypto feels like a solution in search of a problem Well, to me the problem is absolutely real. Decades ago, my country suffered from hyperinflation. We went through several inflationary currencies like it was nothing until some economist managed to dupe everyone into believing it was gonna be different this time. Not before desperate attempts to control inflation were implemented, though. In the 90s the president…

In order for a cryptocurrency to be the solution to that problem - an authoritarian government routinely destabilizing a currency, or freezing financial accounts - that cryptocurrency would have to be ubiquitously in use by everyone involved in any financial interaction. Grocery stores, clothing outlet malls, lawyers, healthcare services, rent/mortgage services, etc. would all have to be on-board with using that cryptocurrency and have the infrastructure to facilitate it. If they didn't, you might as well have a frozen bank account, or a hyper inflated currency.

If you're in a state that can freeze bank accounts and completely retool the national currency on a whim, what prevents them from strong-arming every one of those above-mentioned institutions into not accepting that cryptocurrency? If you can freeze everyone's bank account, you can certainly enforce jail time for a store owner who is found to be doing transactions in whatever cryptocurrency.

Basically, for cryptocurrency to solve the problem you describe, it would have to become the same structure that caused/causes the problem to begin with. You'd be back to square one.

Re: Coinbase warns that bankruptcy could wipe out user funds

#393

Post by MomoXenosaga »

tablespoon wrote: post #198
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...

> 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 "futu…

"Be your own bank". It is bullshit because nobody wants to bother with that just as nobody wants to bake their own bread.

Re: Coinbase warns that bankruptcy could wipe out user funds

#394

Post by sacrosancty »

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…

Who's shocked? The journalist? It's their job to appear shocked so stories sound more interesting. You might be imagining some fantasy fool to laugh at.

Re: Coinbase warns that bankruptcy could wipe out user funds

#395

Post by ceejayoz »

svnt wrote: post #344
tablespoon wrote: post #195

Earlier quoted context omitted.

> 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'…

If they were conservatively minded or playing it safe, the highest probability is that they left or lost a long time ago, or they haven’t entered yet. Coinbase won, effectively, which means they are well beyond taking a cut of transactions and calling it good. The statement from the CEO is to prevent a run. Why do they need to prevent a run if they aren’t farming the float? The only other option is “we make our money…

> The statement from the CEO is to prevent a run. Why do they need to prevent a run if they aren’t farming the float?

Users/holdings going down aren't good for the company and stock, even if a run doesn't hurt them financially.

Coinbase claims not to do anything with deposits: https://help.coinbase.com/en/coinbase/privacy-and-security/o...

Re: Coinbase warns that bankruptcy could wipe out user funds

#396

Post by OOPMan »

jobs_throwaway wrote: post #308
tablespoon wrote: post #236

Earlier quoted context omitted.

> For some people sure, but not all, and I would even go as far as to say not the main intention of the original product. It certainly wasn't the "main intention of the original product," but Bitcoin failed at that. A big part of that failure was the peculiar ideology that got baked in through many of its design decisions.

> but Bitcoin failed at that what makes you say that? I use bitcoin to conduct private transactions regularly and its pretty darn solid for that purpose. Doing such a transaction over the internet, before bitcoin, required you to use permissioned rails.

And yet if a hundred million people tried to use it the way you do, the whole system would implode.

A monetary system that only works if a small number of people use it is...not useful.

Re: Coinbase warns that bankruptcy could wipe out user funds

#397

Post by nmfisher »

sdenton4 wrote: post #230
tablespoon wrote: post #205

Earlier quoted context omitted.

> 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.

Pithy, but also not true. If a bank goes belly up, your average Joe’s bank account is first in line (via deposit insurance), as are employee entitlements.

Coinbase is most decidedly not a bank, which is why the former doesn’t apply.

Re: Coinbase warns that bankruptcy could wipe out user funds

#398

Post by nmfisher »

xur17 wrote: post #162
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…

> Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible. I'm curious about this bit - are they required to structure their company in this way, or was it a choice that they made?

Perhaps someone with closer knowledge of USA finance law can fill me in - is there anything legal preventing Coinbase acting as trustee for customers as beneficiary? Surely that would avoid this situation (though there are probably commercial considerations why they don’t want to do that).

Re: Coinbase warns that bankruptcy could wipe out user funds

#399

Post by xur17 »

nmfisher wrote: post #398
xur17 wrote: post #162

Earlier quoted context omitted.

> Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible. I'm curious about this bit - are they required to structure their company in this way, or was it a choice that they made?

Perhaps someone with closer knowledge of USA finance law can fill me in - is there anything legal preventing Coinbase acting as trustee for customers as beneficiary? Surely that would avoid this situation (though there are probably commercial considerations why they don’t want to do that).

And if there isn't, I'm curious if there are other US exchanges that are structured in such a way (acting as a trustee for customers).

Re: Coinbase warns that bankruptcy could wipe out user funds

#400

Post by mrtranscendence »

formerkrogemp wrote: post #193
Forgeties79 wrote: post #185

Earlier quoted context omitted.

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.

To be a bit pedantic, there are CEOs of all sorts of organizations, many of which are tiny nonprofits that bring in very little money. You could be a CEO and bring home $60k a year.
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