Coinbase’s statement about bankruptcy erupts.
Since the market crash, a lot of people have already lost a lot of money in the crypto market. The life savings of many have vanished like a magic trick by magician. At this point, the investors just want to avoid hearing rumors about crypto exchanges going bankrupt. In one such incident, Coinbase, US’s leading crypto exchange, published its disclosure according to the framework set up by SEC, where in it is mentioned that, if the trading company were about to go bankrupt, the customers assets will used as proceedings of the unsecured creditors. This disclosure erupted a lava of doubts and panic and fueled in the fire about Coinbase’s bankruptcy. Observing the panic stricken people around Coinbase, the CEO of Coinbase Brian Armstrong mentioned that, the disclosure is made according to the rules set by SEC and that Coinbase was nowhere near bankruptcy.
US Presidents intervention on the issue.
US President, Joe Biden made it clear to the administration that the crypto exchanges have to maintain separate corporate funds and separate customer funds. Since, the law of SEC asks Coinbase to jam the funds of customers in a bankrupt situation, it could cause a lot of problem for the customers as it could rob off their savings, money saved for educational purposes. To address the problem, the federal government plans to lobby US lawmakers to require crypto businesses to keep their customers’ funds walled off under a future legal framework.
Unpopular opinion about customer’s funds in crypto.
There’s a lot of unpopular opinion about how a customer’s funds are used by crypto trading companies. Some feel that, the trading company will use the funds according to their will and wish. Gensler pointed out that, crypto exchanges actually trade against you in the course of time. Since Gensler is advocating the rights of customers, the crash of Terra’s USD and LUNA and the loss of billions in the market can add fire to the cause.
Situation as on date for Crypto exchanges.
As on date, crypto’s leading platforms such as coinbase, Binance.US, FTX and Karen have to worry less about administration’s push for a custody rule. Since congress’s major focus will be on the upcoming elections, a crypto bill asking for custody rule is most likely to come to existence next year, under new Congress’s regime. According to a professor Patrick McCarty, who teaches crypto classes at Georgetown law, says different accounts for customers and corporate might be good to sound, but crypto market needs a strict legislative framework and a deeper overhaul of business model are needed for crypto market to prosper and grow.