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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

#11

Post by core-utility »

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

Coinbase Pro is FDIC insured, makes one wonder why Coinbase itself isn't.

https://pro.coinbase.com/?1416

Re: Coinbase warns that bankruptcy could wipe out user funds

#12

Post by IfOnlyYouKnew »

maxerickson wrote: post #9
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 you don't have significant liabilities you can't really go bankrupt. (I didn't look to see if that was the case, just making the point in general)

They just posted a quarterly loss of $430 million.

Re: Coinbase warns that bankruptcy could wipe out user funds

#14

Post by maxerickson »

IfOnlyYouKnew wrote: post #12
maxerickson wrote: post #9

Earlier quoted context omitted.

If you don't have significant liabilities you can't really go bankrupt. (I didn't look to see if that was the case, just making the point in general)

They just posted a quarterly loss of $430 million.

Okay, but that isn't a liability in an accounting sense, it is a cash flow.

Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations).

So if they shut it all down, there would be funds left over.

Re: Coinbase warns that bankruptcy could wipe out user funds

#15

Post by Barrera »

Also read the fine print about the "insurance" Coinbase carries against loss of bitcoin through an attack. It's limited to the hot wallet only. Cold storage is not insured.

In other words, the insurance is probably worthless. People with the good sense to realize that Coinbase is not a bank in any sense of the word are unlikely to be affected.

Re: Coinbase warns that bankruptcy could wipe out user funds

#16

Post by thesuperbigfrog »

eatonphil wrote: post #4
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…

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…

>> For a public company ceo to say that, isn't that securities fraud?

Cryptocurrencies are not regulated securities.

What laws protect cryptocurrency "investors"?

Re: Coinbase warns that bankruptcy could wipe out user funds

#17

Post by tmountain »

_Algernon_ wrote: post #6

This boils down to the "not your keys not your coin" mantra that's often repeated in the cryptocurrency community. It is possible to move your coins to your own wallet and manage them on your own. This comes with risks (eg. lost keys). Keeping them on exchange comes with different risks. Anyone holding significant amount of cryptocurrencies should consider the risks of each choice, make an informed decision, and live…

This feels similar to buying a stock’s street name (a proxy for the actual share) vs directly registering a stock in your name. A key selling point of crypto has always been eliminating central control. If someone else is managing your keys, it’s a given that they’ll borrow against those entries in one way or another (putting the money to work so to speak). Risk assessment depends on which someone thinks is more likely, a lost key, or a default. We are living in some pretty wild times given that the later may trump the former.

Re: Coinbase warns that bankruptcy could wipe out user funds

#18

Post by usrn »

I've been messing with crypto long enough to know how this goes and my coins are already in a local wallet.

Coinbase had a good run but don't be stupid. Crypto exchanges aren't insured like consumer checking accounts are in the US and when they're gone they're gone. Geth isn't hard to set up for most of us, it took me about 20 minutes to have it up and running after not using a local wallet for nearly a decade.

Remember to write down your password (I can't emphasize that enough. I'd be retired by now if I had done that with the wallet I made in 2011) and back up your wallet. I keep mine in git.

Re: Coinbase warns that bankruptcy could wipe out user funds

#19

Post by patrickthebold »

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…

I'm not familiar with how any of this works, but I kind of thought coinbase was less like a bank—paying interest on deposits—and more like a user friendly web ui for managing your assets, because dealing with private keys is hard for a user.

If, for example, Dropbox declares bankruptcy I'd be shocked if creditors could search through the user data for things of value.

It seems like there would be plenty of money to be made just charging transaction fees and holding assets 1-1 for the users, but what do I know.

Re: Coinbase warns that bankruptcy could wipe out user funds

#20

Post by mupuff1234 »

core-utility wrote: post #11
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 Coinbase Pro is FDIC insured, makes one wonder why Coinbase itself isn't. https://pro.coinbase.com/?1416

Afaict only fiat holdings are FDIC insured (for both pro and non-pro).
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