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Published June 2, 20221 min read

Paul Grewal emphasized that consumer assets are physically and legally safeguarded.

CoinMooner Team

In May, Coinbase disclosed to the SEC that in the event of bankruptcy, crypto-assets kept in custody on behalf of its clients might be "subject to bankruptcy proceedings" and consumers could become "unsecured creditors" as a result.

Coinbase revealed losses of $430 million in the first quarter of 2022 and a 27 percent decline in sales compared to the same period in the previous year, prompting the revelation to be thrown into the public spotlight. Coincident with the news trend, the value of Coinbase's junk bonds also started to decline.

In a blog post published on Thursday, Coinbase's chief legal officer clarified and explained the situation amid social media speculation that the business may go bankrupt.

Grewal claims that the exchange safeguards consumers' assets "legally and physically." The chief legal officer said that the company has revised its Retail User Agreement to extend the bankruptcy protections of institutional customers to retail investors. He further added that the company does not take any action with its clients' assets until given explicit permission to do so. This covers lending and all other commercial operations undertaken by conventional banks.

Brian Armstrong, co-founder and CEO of Coinbase, weighed in on the matter in May. The CEO emphasised that there is "no danger of bankruptcy" at the company and just included the language to comply with a new SEC regulation. Regardless, he added that there are robust legal safeguards for its users.

In addition, the attorney said in a tweet that the exchange is "financially robust" and has more than $6 billion in the bank, meaning that despite the "FUD," it would not be going bankrupt anytime soon.

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