Top cryptocurrency exchange Coinbase quit India operations owing to "informal pressure" from the Reserve Bank of India (RBI), its CEO Brian Armstrong has revealed for the first time. Its shares are also in a continued downward trend. But that's not the only worry on Armstrong's plate as a new disclosure in the firm's quarterly filing has stirred panic among its customers.
As concerned users of Coinbase flocked to social media to express concerns regarding the new risk factor included in the disclosure, Armstrong has responded in a bid to allay fears of bankruptcy.
New risk factor causes panic
Coinbase included a new risk factor in its disclosure in the firm's quarterly filing, which stated: "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." Naturally, this triggered panic among Coinbase users as keeping the coins on the platform would be considered risky.
No risk of bankruptcy
Armstrong was quick to respond to the fears of Coinbase customers. In a series of tweets, he assured that neither the company is facing bankruptcy nor the funds of customers are at risk. He further clarified that the inclusion of the risk factor is to meet SEC regulatory requirement.
"We should have updated our retail terms sooner, and we didn't communicate proactively when this risk disclosure was added. My deepest apologies," he said.
He said that the funds belonging to Prime and Custody customers are already safe through the
"strong legal protections in their terms of service that protects their assets, even in a black swan event like this." As for the retail customers, Armstrong said the company is taking further steps to update the terms in a way that offer similar protections to them.
Customers' fear of Coinbase facing bankruptcy came at a time when the company's shares have plummeted 71 percent so far this year. But that's been the case across all cryptocurrencies, including bitcoin, whose price has plummeted below $30,000.
Specifically for Coinbase, the company missed its market expectations. The crypto exchange reported its first net loss as a public company of $430 million in the first quarter this year. The revenue dropped 27 per cent to $1.17 billion, down from $1.6 billion in the first quarter of 2021 and monthly users were also decreased by more than 19 per cent to 9.2 million, as the global crypto market goes through mayhem.