Keep going, says Armstrong from Coinbase

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Von: Krypto News Österreich

Even in the middle of a turbulent week in terms of crypto, Coinbase managed to stand out. His shares broke up by 35 percent in May and fall to 77 percent this year.

The results after the Availment Casting on Tuesday seemed to confirm the fears about the company. The results of the first quarter missed the forecasts, the company pointed out "weaker crypto market conditions" and reported a net quarterly loss of $ 430 million. But there are a few lines in its latest 10-Q submission about his responsibility for the protection of customer assets that we really noticed.

According to the file, Coinbase held $ 256 billion in Fiat currencies and cryptocurrencies in the customer's order at the end of the first quarter. And as was also pointed out, crypto assets are not insured or guaranteed by any government or government agency.

Since kept crypto assets can also be regarded as the property of a bankruptcy mass, the crypto assets we have kept in the name of our customers could be the subject of bankruptcy proceedings in the event of insolvency and these customers could be treated than our general unsecured believers.

In other words, Coinbase should go into bankruptcy, customers could lose their money that they had entrusted with the stock exchange for storage.

occasional observers could think "if you have to mention it at all ...". The mood has reduced the market value of Coinbase by a further 25 percent at the pixel period. Before the market was opened, Brian Armstrong, CEO from Coinbase, used Preventive Twitter to spread the news that there is nothing to see here.

The reason for the disclosure was, according to Armstrong, a new SEC request for disclosure for listed companies that consider crypto assets for third parties. He emphasized that customers had strong legal protection - although those who were not examined in court - apologized to retail customers that they have not updated their conditions to reflect the changes.

Nevertheless, the unveiling arouses memories of the failure of MF Global a little more than a decade ago. The futures broker became the then eight-largest bankruptcy in the history of the United States when a 6.3 billion dollar bet on the prices of European government bonds went spectacularly wrong. Then it turned out that MF had messed up with the company account globally. More than $ 1.6 billion in customer funds were missing, since they were transferred to various opponents in order to meet the company's own additional claims.

In the trade industry, some lines are more sacrosankt than others. But the breaking of walls that were built around customer funds is one of the greatest sins. The stain of MF Global remained for years. To mention it compared to the derivative industry was like a blue spot.

This background story makes the new SEC requirements more urgently than a reminiscence. The MF Global supervisory authority was the Commodity Futures Trading Commission at the time of collapse. Former CFTC boss Gary Gensler is now head of the SEC, the agency, which demands the new transparency for mixed assets.

Gensler withdrew from the CFTC examination against MF Global and referred to his connections to Jon Corzine, the CEO of MF and a former partner of Goldman Sachs.

But the waiver was sharply criticized, not only from an industry that accused him of dealing with it too hard. An internal CFTC-Wachhund questioned Gensler's decision, and a senator openly asked whether Gensler was "interested in protecting customer accounts or protecting himself from the accountability".

Obviously, some lessons go deep. Gensler and the Sec look as if they are trying to ward off a similar problem in crypto technology before it appears. Perhaps it is more about doing as much as possible because spot crypto-assets are not regulated. But Gensler does not yet give up the fight.

As he said Bloomberg News overnight, Gensler is concerned about the lack of Chinese walls between different business areas, from custody to market making to the central order book of the stock exchange. Here is Gensler's money quote:

crypto has many of these challenges - from platforms that are ahead of their customers. In fact, they often act against their customers because they operate a market marker against their customers.

It stands out again - if it ever had to be spelled - that it is only partially correct to name these companies "stock exchanges".

Boring old securities and derivate exchanges do not come with market-make switches or venture capital arms. You do not take any risk, as a bank or a broker does. They only compare buyers and sellers (and beat the resulting data).

Armstrong from Coinbase tried to point out that a coin base bankruptcy was a "black swan" event. In fact, he clearly said that "we have no bankruptcy risk". The thing is that black swans appear in the wild from time to time. Here is one we saw on the weekend.

It is more relevant that the shares of Coinbase have lost more than four fifths of their value since the IPO last year, and the bonds of Coinbase from June 2026 are about 68.5 cents, which indicates serious market concerns (fair or not) about a financial misfortune.

The money from MF Global was finally traced back and customers were largely restored to detours and customers. But it took years, was associated with many time -consuming legal disputes, and the consumer protection regulation came into force.

If the unthinkable result is difficult to imagine a large crypto exchange.


Source: Financial Times