Brian Armstrong made his comments after Coinbase said on Tuesday that, in the event of bankruptcy, crypto assets held by the exchange could be considered property of the bankruptcy proceedings and customers could be treated as general unsecured creditors.
An unsecured creditor would be one of the last to be paid in any bankruptcy and last in line for claims.
Coinbase, whose shares plunged 15% in extended trade on Tuesday, also missed estimates for first-quarter revenue and posted a loss as turmoil in global markets curbed investor appetite for higher risk assets including cryptocurrencies.
Coinbase, the largest US cryptocurrency exchange, said its disclosure might lead customers to believe that keeping their coins on the platform would be considered “more risky”, which would in turn materially impact its financial position.
2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121,… https://t.co/1xoCwme7UZ
— Brian Armstrong – barmstrong.eth (@brian_armstrong) 1652240584000
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“We have no risk of bankruptcy,” Armstrong wrote on Twitter after the disclosure, which he said was made to meet SEC requirements.
He said it was unlikely that “a court would decide to consider customer assets as part of the company in bankruptcy proceedings”, although he said it was still possible.
He said Coinbase would take further steps to ensure it offered protection for its retail customers.
“We should have updated our retail terms sooner, and we didn’t communicate proactively when this risk disclosure was added,” Armstrong said. “My deepest apologies.”