Coinbase CEO Brian Armstrong Explains Crypto Bankruptcy Risks in the Event of a Black Swan Event

In the wake of Coinbase’s second 10-Q filing, CEO Brian Armstrong has reassured investors that the crypto exchange is not in danger of bankruptcy.

According to Coinbase’s 10-Q form, which was submitted to the Securities and Exchange Commission (SEC) on Tuesday, the crypto assets the exchange maintains for its customers may be subject to bankruptcy procedures if the company fails.

In the event of a bankruptcy, the crypto assets we have in custody on behalf of our customers may be subjected to bankruptcy process and such consumers may be classified as our general unsecured creditors.

As a consequence, consumers may be less inclined to employ our custodial services, which may have a negative effect on our company, operational performance, and financial condition.

Concerns raised by the 10-Q form’s contents were addressed by Armstrong, who told his Twitter followers that the information was included in conformity with a new SEC regulation and that Coinbase is not on the verge of financial collapse.

“We filed a statement in our 10Q today on how we store crypto assets. There is some buzz around it.” The tl;dr [too lengthy; I didn’t get through it]: At Coinbase, your money is as secure as it’s ever been.

As a result of the SEC’s new SAB 121 disclosure rule for publicly traded corporations holding crypto assets on behalf of third parties, we decided to incorporate an additional risk element in our analysis.

Armstrong also discusses the need of disclosing a company’s insolvency risk factors. Legal protection for crypto assets has not been proven in court, and it is conceivable, but unlikely, that a judge might regard customer holdings as part of the firm in bankruptcy proceedings even if it damaged customers.”

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