This reads like a joke but it’s actually what people do if they don’t want to trust an exchange
I don’t think it’s a shrug. It’s clearly not a good thing and something that should be sorted out and resolved by Coinbase. I think Wichita’s point is to tell people here if they have crypto how to avoid this risk. It’s also not clear how big a risk this is as there is no indication Coinbase is anywhere close to bankruptcy - their disclosure indicates they have all the customer assets segregated and then sufficient capital/revenue to cover their operating expenses. There are of course other risks (hacking, legal, etc.) that could create a problem - but sadly this has always been a risk for crypto exchanges.
The big question is whether this should be resolved by regulating Coinbase/crypto like a brokerage or similar, or whether it’s just an inherent risk with using a de-regulated currency and firms should be disclosing the risk/taking more steps on their own to mitigate. Personally, I’m not sure what the right answer is.
edit: I think people are happy to discuss this (and are in the discord, where no one is defending Coinbase) - you’re just not going to get as good of a discussion here where you have people who are just here to troll.
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I don’t think the government should legitimize crypto as an investment by regulating it. It is not an investment, it is a speculation vehicle. Fraud is already illegal, prosecute that. God knows there is plenty of it occurring.
Ok boomer
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I’ve been saying coinbase is scum here for a long time. Basic regulation is needed. But do we really trust 80 year olds who probably don’t know how to work a computer and their lobbiests to write them? I’m not so sure?
When this many customers are at risk of getting bilked crypto developers need to stop telling their customers “be smarter!” and start developing some basic consumer protections. I don’t see how any of this is sustainable if it’s this risky for ordinary people to put their money in the largest exchanges.
This is USA #1. Corporations don’t set up basic consumer protections for their customers unless forced or incentivized to do so.
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I practice consumer bankruptcy law, not business bk law but it seems very likely crypto depositors to coinbase would be treated either as general unsecured creditors or as a special class like underinsured depositors if a bank fails that gets paid right before the unsecured creditors. Probably the former if i had to bet on it. Secured and priority creditors get paid first and i don’t see any way a crypto depositor to coinbase would fit into one of those two categories.
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Ideally customers would not be creditors at all, they would be the owners of property that is being held for them by Coinbase.
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You would need to rewrite the bankruptcy code to change that. I’m not saying you are wrong but customers do often end up as “creditors” in bankruptcy proceedings.
ETA-The bankruptcy code does need a serious rewrite in a lot of ways.
So today we’re doing round 437 where a handful of people pretend to be aghast about something everybody already knew?
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Right, so shouldn’t crypto guys be demanding some kind of guardrails here when the biggest exchange is just a massive scam? I dont see how “Suck it, grandma, shoulda controlled your keys!” is a response people are okay with when consumers get bilked.
And companies can set themselves up like that without regulation from the government, right? Coinbase didn’t do that because it wanted to comingle the billions of dollars of deposits. The depositors ending up as unsecured creditors in bankruptcy sure makes financing Coinbase more attractive to secured creditors!
fOOT
Why would you have to rewrite the bankruptcy code to do that? Brokerage firms hold the property of their customers as bob describes, right?
You already know there are many people pushing for exactly this sort of regulation, and you already know that pretty much nobody is telling their grandma to buy crypto. Why do you insist on constantly doing this transparently bad faith trolling month after month after month?
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No one has said that but the crypto scams are largely the same scams that exist everywhere else. Mostly email/internet phishing. Alert me the next time the usual suspects are up in arms when grandma gets taken to the cleaners by a Nigerian prince email scam that happens 100x as frequently as the types that get linked here by the trolls?
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If the brokerage goes bust the assets are still going to be distributed by the bankruptcy court. The people who get their money back are still effectively creditors for bankruptcy purposes.
Yes coinbase could probably do some things to help protect depositors and they should. But coinbase sucks. No argument from me there.
The assets are going to be distributed by the bankruptcy court, ok, but the guy who bought a million shares of Alcoa isn’t going to see his stock sold to pay the secured creditors! That would mean that the brokerage is essentially borrowing money with investors’ assets as collateral. Which would be totally insane.
But if coinbase depositors are unsecured creditors in a bankruptcy, that’s exactly what coinbase is doing every time they raise money. Which is totally insane!
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