The CEO of the Coinbase exchange, fearing the panic among users of the platform, explained that the filing of the 10-Q SEC form does not indicate an imminent default.
Brian ArmstrongBrian Armstrong reported on Twitter that the trading platform did not face the risk of bankruptcy, as it seemed to some members of the community. Submitting Form 10-Q to the Securities and Exchange Commission (SEC) is merely a regulatory requirement. By submitting the form, the exchange explains what will happen to user assets in the event of a site default.
“Today we disclosed information about the volume of our cryptocurrency assets. Your Coinbase funds are as safe as ever. We do not have bankruptcy risk, however, we have included a new risk factor based on the SEC requirement called SAB 121. It is a new regulatory disclosure requirement for public companies holding crypto assets to third parties,” said Armstrong.
The CEO of Coinbase went to great lengths to explain that disclosure of risks about bankruptcy factors is a necessary procedure:
“Because cryptoassets held in custody may be considered the property of the exchange, in the event of a bankruptcy, cryptocurrencies we hold in custody on behalf of our clients may be subject to bankruptcy proceedings and such clients may be considered our unsecured creditors.”
Armstrong expressed concern that the news about the filing of the 10-Q SEC form could be perceived against the backdrop of a fall in the cryptocurrency market as a signal of an imminent default:
“This may cause customers to view our storage services as more risky and less attractive, and any failure to grow our customer base, discontinue or reduce customer use of our platform and products could adversely impact our business, operating results and financial results. indicators”.
Armstrong explained the importance of disclosure of bankruptcy risk factors:
“The disclosure makes sense as these remedies have not been tested in court specifically in relation to crypto assets and it is possible, though unlikely, for the court to decide to consider the client’s assets as part of a company in bankruptcy proceedings, even if it would be detrimental to consumers.”
The first quarter of 2022 was not very successful for the American crypto exchange Coinbase – the company’s revenue decreased significantly, and the net loss amounted to $430 million.
Source: Bits
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