The cryptocurrency exchange platform has unveiled a decline in financial results. She was also caught off guard as she points out that the cryptocurrencies she holds on behalf of her clients cannot automatically return to them in the event of bankruptcy.
American giant Coinbase is in bad shape. On Tuesday, the Nasdaq-listed cryptocurrency exchange released its results for the first quarter of the year. And what we can say is that the numbers are bad: its net income fell to $1.17 billion in the first quarter from $1.60 billion a year earlier, total transactions fell to $309 billion from $335 billion a year earlier, and the number monthly active users fell from 11.4 million to… 9.2 million.
The company attributes these figures to the general environment in the cryptocurrency market, where prices have been falling since the beginning of the year, in particular due to the correlation with the Nasdaq, which itself is upset by the gloomy economic environment. “These market conditions had a direct impact on our first quarter results. But we have approached these market conditions with foresight and preparation, and we remain more than ever excited about the future of cryptocurrencies,” the company said in a statement.
Coinbase, which will celebrate its 10th anniversary this month, wanted to reassure investors. In her letter, she points out that market conditions are “fluctuating”, specifying that she prefers to have a long-term strategy. In addition, Coinbase discussed its recent investments, including entering the NFT market with the launch of a beta version of its NFT Marketplace.
In its quarterly report filed with the SEC, Coinbase also points out that cryptocurrencies held on the platform “may be treated as bankrupt assets and customers may be treated as general creditors. unsecured. This may lead clients to view our custody services as more risky and less attractive.”
The comment, which sparked an uproar from the community on social media, prompting Coinbase boss Brian Armstrong to provide further clarification. “Your funds are safe on Coinbase, as always,” he said.
“We are not in danger of bankruptcy,” he wrote, acknowledging that his company included “a new risk factor based on the SEC requirement, which is a new disclosure requirement for public companies holding crypto assets for third parties.”
He added that “it is possible, although unlikely, that the court will decide to consider the client’s assets as part of the business as part of the bankruptcy proceedings.” In other words, in the event of bankruptcy, it is possible that crypto assets held on behalf of certain Coinbase customers will first be used to pay off debt to certain company creditors.
In this context, if a company believes that while some of its customers, in particular those who use its core services, have strong legal protections, this is not the case for all. Therefore, Coinbase has indicated that it is willing to take protective measures for its retail customers. “We should have updated our retail terms earlier, and we didn’t announce in advance when this risk disclosure was added,” he admits.