Hidden away in Coinbase Globals disappointing first-quarter earnings reportin which the U.S.'s largest cryptocurrency exchange reported a quarterly loss of $430 million and a 19% drop in monthly usersis an update on the risks of using Coinbases service that may come as a surprise to its millions of users.
In the event the crypto exchange goes bankrupt, Coinbase says, its users might lose all the cryptocurrency stored in their accounts too.
Coinbase said in its earnings report Tuesday that it holds $256 billion in both fiat currencies and cryptocurrencies on behalf of its customers. Yet the exchange noted that in the event it ever declared bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings. Coinbase users would become general unsecured creditors, meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.