May has been an explosive month for cryptocurrency, with huge market crashes and the complete collapse of LUNA causing a massive downturn in average trading figures. To add to this news, Coinbase’s recent financial reporting release doesn’t shine favorably on the decentralized exchange.
With over 98 million verified users and billions in controlled assets, many thought of this institution as simply too big to fail. Yet, things aren’t looking good for Coinbase, with their recent announcement suggesting that they may soon have to file for bankruptcy.
To make matters worse, due to the lack of regulation within decentralized systems, if Coinbase fails, all of the money on the platform that was invested by users into cryptocurrency may also be hanging in peril. This could technically mean that millions of Coinbase users around the globe may lose access to all of the money they’ve invested in cryptocurrency.
A huge part of what’s causing this situation to spiral so quickly is the fact that the US government has not had to deal with a cryptocurrency exchange going bankrupt, meaning a whole plethora of financial and legal questions have begun to arise.
Commenting on this possibility, a Georgetown University law professor that specializes in bankruptcy, Adam Levitin, speculated, “What happens to a customer if an exchange files for bankruptcy?” Going on to answer his own question, “It ends very badly for customers.”
Levitin’s comments further add to the general sense of unknowing, with several experts all having different opinions. Although Brian Armstrong, the CEO of Coinbase, said on Twitter that user’s funds would be safe, there is actually very little clarification around if this is true, and the extent to which users would be able to sell or transfer their funds if the whole exchange where to go bust.
This situation became even more drastic earlier in May, when Coinbase announced its first-quarter earnings for 2022, with over $430 million in…
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