[HN Gopher] Coinbase warns that bankruptcy could wipe out user f...
___________________________________________________________________
Coinbase warns that bankruptcy could wipe out user funds
Author : okasaki
Score : 625 points
Date : 2022-05-11 11:28 UTC (11 hours ago)
(HTM) web link (fortune.com)
(TXT) w3m dump (fortune.com)
| dehrmann wrote:
| I'm going to get a few details wrong, but mutual funds and ETFs
| go to creative legal efforts to prevent this. Funds are usually
| independent entities that pay the fund house for management and
| marketing services. If the fund house goes under, it doesn't hold
| the assets in its funds, so fundholders aren't screwed.
| calltrak wrote:
| I had a couple of hundred dollars with coinbase and they were
| going to charge me 30% to get the money out. I thought to myself
| want a bunch of thieving cunts.
| cm2187 wrote:
| It's amusing for someone who works in finance to see the crypto
| market re-doing the last century of financial scandals and
| regulations in fast forward. Discovering capital gain taxes,
| market manipulations, the necessity to separate firm money from
| client money for brokers...
| cheschire wrote:
| Seems vaguely similar to how the wild west had to re-do
| civilization and industrialization in fast forward.
| ur-whale wrote:
| Not your keys ...
| yrttq123 wrote:
| noodles_nomore wrote:
| Coinbase limits withdrawals in times when crypto crashes by
| removing the 'financial services' header in the settings where
| your connected bank accounts are listed. I don't know if they
| still do that, but I saw this as recently as a few months ago.
| You can still empty your account by going through the account
| deletion process. It will give you the option to sell all your
| crypto (and maybe to send it to a wallet, I don't know) and do a
| full withdrawal. Afterwards you can still stop the deletion
| process if you think you want to keep the account anyway (e.g. I
| was worried the transaction would somehow not complete and then
| not have access to the account).
| mkr-hn wrote:
| As someone without 250k in the bank (or generally), FDIC
| insurance is quite reassuring. Banks pay into it like any other
| insurance, so it would take a huge money-doesn't-matter-anymore
| shock to overwhelm it. 2008 was pretty close! Crypto wouldn't do
| any good for me since the utility bills for all the internet
| infrastructure are paid for with real money (in the "most people
| exchange it for goods and services" sense).
|
| There'd be nowhere to go where even a paper wallet would do me
| any good. You could execute a 51% attack on a solar-powered
| NetBSD toaster.
| mattwilsonn888 wrote:
| > You could execute a 51% attack on a solar-powered NetBSD
| toaster.
|
| I don't think you understand the basics of Bitcoin.
| [deleted]
| mkr-hn wrote:
| What are the odds I would know the difficulty of mining
| bitcoin scales up or down with the hashrate without knowing a
| little about it?
| bacan wrote:
| So Coinbase is gonna be bankrupt pretty soon i guess
| dqpb wrote:
| If Vanguard went bankrupt, would customers lose all their stocks?
| kasey_junk wrote:
| No. SIPC would make the customers whole first before letting
| any creditors access their shares. The issue is Coinbase is not
| handled by SIPC (or similarly the FDIC).
| josephd79 wrote:
| Coinbase is the AOL of crypto.
| bonestamp2 wrote:
| Is there a better crypto on ramp though?
|
| Coinbase will let me transfer up to $1000 worth of crypto off
| their platform immediately after purchase even though the funds
| haven't settled in their account yet. Every other crypto
| platform I've used, forces a wait of 3, 7 or 10 days before you
| can withdraw your new crypto.
| themusicgod1 wrote:
| Yes. Doing work or providing a good or service in exchange
| for bitcoin/crypto.
| smoyer wrote:
| No surprise ... Use your own wallet!
| monkeydust wrote:
| Would this situation be same as FTX, Binance as far as we know?
| bitxbitxbitcoin wrote:
| Yes.
| AdamN wrote:
| wut?
| fullshark wrote:
| If Coinbase goes bankrupt your crypto-coins will be worthless at
| least.
| Havoc wrote:
| That sounds suspicious to me.
|
| In UK at least client money should be segregated especially in
| the context of custody assets. Really shouldn't enter the same
| pool of assets as Coinbase's office chairs in case of liquidation
| smcl wrote:
| Didn't it take a fairly long while before client money laws
| came in even in traditional banking? I don't have a date so I
| could be wrong, but taking the history of british banking I
| have a feeling this was a relatively recent thing. Being
| generous, we're still within the first decade of crypto as an
| investment instrument, I imagine regulations haven't quite
| caught up so really it's no surprise newer crypto companies
| like Coinbase aren't particularly serious about keeping client
| money/assets separate.
|
| And as much as client money _should_ be segregated, some big
| names are still getting dinged with CASS breaches - Charles
| Schwab in 2020, for example.
| Havoc wrote:
| Most things should have pretty good client money coverage now
| - basically anything that is deposit taking and then some.
|
| >it's no surprise newer crypto companies like Coinbase aren't
| particularly serious about keeping client money/assets
| separate.
|
| I'd say the opposite. As crypto company I'd be expecting the
| regulator to be on my ass from day 1 above the pettiest
| things.
| smcl wrote:
| Honestly I believe that you, the user Havoc, are probably a
| sensible person who would treat client money as if you were
| operating a well-regulated financial services firm, even if
| such regulations weren't in place. However companies are
| not necessarily built that way - if they don't _have_ to do
| follow some rule that could be considered a bit burdensome,
| they likely won 't. Why follow rules that might not apply
| to you, given that you are using a new-and-exciting
| instrument that you could credibly argue fall outside these
| regulations (and if doing so could permit you to speculate
| and make a bit of extra money)?
| nabla9 wrote:
| >In UK at least client money
|
| As I understand it, English law custody model is a trust
| arrangement and pure delegate custodian should be safe in the
| case of bankruptcy.
|
| Shouldn't does not mean that it does not happen in the UK too.
| The Lehman Client Money Litigation in the UK is a good example.
| Lehman Brothers International fell short $2.6 billion in client
| money under CASS 7 (statutory trust, segregation and pooling).
|
| Coinbase is not operating with that model. Coninbase customers
| can be just general unsecured creditors
|
| > because custodially held crypto assets may be considered to
| be the property of a bankruptcy estate, in the event of a
| bankruptcy, the crypto assets we hold in custody on behalf of
| our customers could be subject to bankruptcy proceedings and
| such customers could be treated as our general unsecured
| creditors
| mellavora wrote:
| Yes, that is how it would work if Coinbase was regulated as a
| custodian. Have you confirmed that they are indeed classified
| in this way, and that your crypo holdings are indeed covered by
| that classification?
|
| Or are you duck-typing Coinbase as a securities/brokerage firm
| based only on "look" and "quack"? (where "look" was a quick
| look without going into the difference between crypto assets
| and regulated securities issued by a regulated public company)
| vmception wrote:
| Not your keys not your coins
| jmyeet wrote:
| This isn't an FDIC issue. This is an Securities Investor
| Protection Corporation ("SIPC") issue. The SIPC was greated
| almost 50 years ago to cover investors in a similar fashion to
| FDIC against the loss of custody assets in the case that a broker
| goes bankrupt. Like FDIC, there are limits.
|
| The point here is that crypto isn't covered by the SIPC [1]. So
| the Coinbase disclosure (required by the SEC) is correct: there
| is no protection for your Coinbase custody assets in the cse of
| insolvency beyond being a general creditor.
|
| This seems like a good thing for investors and customers to know.
|
| [1]: https://www.sipc.org/for-investors/what-sipc-protects
| prepend wrote:
| Since coinbase isn't FDIC insured, it makes sense that if
| coinbase goes bankrupt, the customer currencies will go away as
| well. And they aren't SPIC insured in the situations where crypto
| is a security.
|
| It's funny to see people shocked (SHOCKED!) when crypto doesn't
| have the protections of regular banking and investments. That's
| why you don't invest with stuff that isn't insured. Those aren't
| real rates, they are risk adjusted rates for not having
| insurance.
|
| It's fine to invest in these products, but scary because people
| aren't doing due diligence and have unrealistic expectations.
|
| The CEO's statement that they won't go bankrupt it just comical.
| Of course he thinks they won't. Few bank CEOs think that. But
| real banks and brokerages have insurance for their customers in
| the rare situation that they go bankrupt.
| sacrosancty wrote:
| Who's shocked? The journalist? It's their job to appear shocked
| so stories sound more interesting. You might be imagining some
| fantasy fool to laugh at.
| andy_ppp wrote:
| Yes, if they definitely won't go bankrupt that means the
| insurance will be extremely cheap! If this insurance isn't
| cheap then that means there is a reasonable chance they could
| go bankrupt. In my opinion all it takes is one insider taking a
| copy of everyone's private keys and they are toast. I would
| advise to not put all your eggs in one basket.
| jpmattia wrote:
| > _Since coinbase isn't FDIC insured,_
|
| The Fortune article in the HN link is writing only about the
| crypto assets, which lack FDIC insurance. Cash assets are FDIC
| insured.
|
| From Coinbase: "To the extent U.S. customer funds are held as
| cash, they are maintained in pooled custodial accounts at one
| or more banks insured by the FDIC."
|
| https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
| HWR_14 wrote:
| > "To the extent U.S. customer funds are held as cash, they
| are maintained in pooled custodial accounts at one or more
| banks insured by the FDIC."
|
| Doesn't that mean Coinbase is insulated from the banks going
| bust? I don't know why a "pooled custodial account" would
| help the Coinbase user. It's still Coinbase's money held for
| them (just like the BTC).
|
| But maybe it does. I'm slightly ignorant here.
| thr0wawayf00 wrote:
| yeah but why on earth would you store cash in Coinbase? Are
| you even getting a savings account interest rate on that?
| 0daystock wrote:
| JumpCrisscross wrote:
| > _have enough to cover maybe 1-2% of all deposits? When the
| real stuff hits the fan and the buck breaks, there won 't be
| any FDIC to protect any investment_
|
| The FDIC "is backed by the full faith and credit of the
| United States government" [1].
|
| Its reserves (a) provide quick cash in case of limited
| problems, (b) insulate the Treasury and Congress and (c) hold
| the FDIC leadership accountable. On account of (c), the FDIC
| oversees its insurees, including by implementing reserve
| requirements [2].
|
| [1] https://www.fdic.gov/resources/deposit-insurance/faq/
|
| [2] https://www.fdic.gov/regulations/laws/rules/7500-500.html
| #fd...
| 0daystock wrote:
| > As required by the Federal Deposit Insurance Act, the
| FDIC Board adopted a Restoration Plan on September 15,
| 2020, to restore the DIF to at least 1.35 percent by
| September 30, 2028. The Plan requires the FDIC to update
| its analysis and projections for the DIF balance and
| reserve ratio at least semiannually.
|
| https://www.fdic.gov/news/speeches/2021/spjun1521a.html
|
| They can't even keep up with their legally mandated deposit
| reserve rate of 1.35% but they're going to bail out several
| failed banks? Come on.
| [deleted]
| matheusmoreira wrote:
| > It's funny to see people shocked (SHOCKED!) when crypto
| doesn't have the protections of regular banking and
| investments.
|
| The problem isn't crypto, it's these exchanges. Nearly everyone
| just leaves their coins in the exchanges. They're essentially
| banks but with none of the protections. They even offer
| cryptocurrency loans, savings accounts and everything.
|
| Cryptocurrencies were supposed to replace banks but they ended
| up reinventing the whole thing badly. It was supposed to be a
| dollars -> electricity -> CPU -> bitcoins closed decentralized
| system, but now it's just dollars <-> bitcoin within
| centralized exchanges.
| Daishiman wrote:
| > Cryptocurrencies were supposed to replace banks but they
| ended up reinventing the whole thing badly.
|
| The only way that statement could be true is if anyone every
| assumed it's feasible or desirable for everyone to have
| physical wallets and self-host everything
| its_ethan wrote:
| I'm not sure who first said it, but crypto feels like a
| solution in search of a problem. Something akin to "when all
| you have is a hammer, everything looks like a nail" - forcing
| crypto/blockchains as solutions to problems that are either
| already solved, or could be solved in other more traditional
| ways, only acts as a disservice to wider adoption imo.
| matheusmoreira wrote:
| > crypto feels like a solution in search of a problem
|
| Well, to me the problem is absolutely real. Decades ago, my
| country suffered from hyperinflation. We went through
| several inflationary currencies like it was nothing until
| some economist managed to dupe everyone into believing it
| was gonna be different this time. Not before desperate
| attempts to control inflation were implemented, though. In
| the 90s the president just froze everybody's bank accounts.
|
| I simply don't trust governments. I want them to have zero
| authority and influence over my money. I don't care what it
| costs to achieve this, as long as governments are
| successfully exorcised from this economy it's worth it. The
| way I see it, pure blockchain solutions are the only way
| this could possibly work and even then only if sufficiently
| decentralized. Exchanges are the complete opposite of this
| vision, they're literally banks with all of the downsides
| and none of the upsides.
| its_ethan wrote:
| In order for a cryptocurrency to be the solution to that
| problem - an authoritarian government routinely
| destabilizing a currency, or freezing financial accounts
| - that cryptocurrency would have to be ubiquitously in
| use by everyone involved in any financial interaction.
| Grocery stores, clothing outlet malls, lawyers,
| healthcare services, rent/mortgage services, etc. would
| all have to be on-board with using that cryptocurrency
| and have the infrastructure to facilitate it. If they
| didn't, you might as well have a frozen bank account, or
| a hyper inflated currency.
|
| If you're in a state that can freeze bank accounts and
| completely retool the national currency on a whim, what
| prevents them from strong-arming every one of those
| above-mentioned institutions into not accepting that
| cryptocurrency? If you can freeze everyone's bank
| account, you can certainly enforce jail time for a store
| owner who is found to be doing transactions in whatever
| cryptocurrency.
|
| Basically, for cryptocurrency to solve the problem you
| describe, it would have to become the same structure that
| caused/causes the problem to begin with. You'd be back to
| square one.
| orwin wrote:
| Or you make that your central bank is independent from
| your president, and that only qualified majority +
| accords from your judicial power can modify the target of
| your central bank. (Edit: to be clear: target and not
| policy. The central bank can still choose how they will
| reach their target).
|
| But you need an effective republic for this, and one that
| have a hint of democracy.
| dboreham wrote:
| > it makes sense that if coinbase goes bankrupt, the customer
| currencies will go away as well
|
| Others have said this, but just to reiterate : this is quite
| wrong. This is like saying that because you hold Amazon stock
| via a Schwab brokerage account, if Schwab were to declare
| bankruptcy, then you would lose your Amazon stock. Needless to
| say that wouldn't happen because you are the owner of the
| stock, not Schwab.
|
| FDIC insurance covers a totally different scenario where the
| money you deposit doesn't really exist (lent to someone else in
| the meantime).
|
| What makes sense is that Coinbase isn't the owner of customers'
| crypto assets. This thread is about the fact that apparently
| that's _not_ necessarily true.
| peyton wrote:
| You might wanna check the fine print on your Schwab brokerage
| account.
| kasey_junk wrote:
| Not sure what you are insinuating but the Schwab fine print
| definitely says that the customer assets are not Schwabs
| (because that's the rules of the regulatory environment
| they work in). No court in the US would would use customer
| shares to settle Schwab debt.
| ldoughty wrote:
| There's no FDIC or other protections in play here, except for
| the small amount of money a customer might have in "cash",
| held by Coinbase pending or resulting from a crypto
| transaction.
|
| Once you buy a bitcoin, you have a digital good, not
| money/currency (as defined by most governments/courts --
| which is the point that matters here)
|
| If you buy a skin in Fortnite, and Fortnite goes under, you
| no longer have that skin, even it if was made by another
| player and put on a public marketplace offered by Fortnite.
| You can't get Forenite to return that skin to you, and you
| can't ask the author to send you a copy to save.
|
| If Coinbase goes under, the crypto would likely be treated as
| digital goods by the court, not as "currency".. or perhaps
| that case would solidify crypto's definition as a security or
| currency... but I'd argue that it's unclear right now, and
| that creditors would want Coinbase to liquidate the digital
| assets to pay off employees, creditors first.
| iamthirsty wrote:
| > Others have said this, but just to reiterate : this is
| quite wrong. This is like saying that because you hold Amazon
| stock via a Schwab brokerage account, if Schwab were to
| declare bankruptcy, then you would lose your Amazon stock.
| Needless to say that wouldn't happen because you are the
| owner of the stock, not Schwab.
|
| But that isn't how Coinbase works. They aren't holding a
| share for you, they are holding your actual assets, with
| nothing in force that they would have to return them, bar
| what is in USD.
| xur17 wrote:
| > Coinbase users would become "general unsecured creditors,"
| meaning they have no right to claim any specific property from
| the exchange in proceedings. Their funds would become
| inaccessible.
|
| I'm curious about this bit - are they required to structure
| their company in this way, or was it a choice that they made?
| nmfisher wrote:
| Perhaps someone with closer knowledge of USA finance law can
| fill me in - is there anything legal preventing Coinbase
| acting as trustee for customers as beneficiary? Surely that
| would avoid this situation (though there are probably
| commercial considerations why they don't want to do that).
| xur17 wrote:
| And if there isn't, I'm curious if there are other US
| exchanges that are structured in such a way (acting as a
| trustee for customers).
| olalonde wrote:
| > It's funny to see people shocked (SHOCKED!) when crypto
| doesn't have the protections of regular banking and
| investments. That's why you don't invest with stuff that isn't
| insured. Those aren't real rates, they are risk adjusted rates
| for not having insurance.
|
| You are missing the point. We are shocked that even if Coinbase
| keeps users' deposits 100% safe, users could still lose their
| deposits if a judge decides so. Why isn't there a way to
| segregate those deposits from assets on which creditors have a
| claim? This kind of simple arrangement ought to be possible
| without new regulations or FDIC-style protection.
|
| Needless to say, "not your keys not your Bitcoin" continues to
| be good advice.
| prepend wrote:
| Coinbase could purchase and maintain insurance against such
| an act. That's what E*Trade/etc do to protect against the
| same risk should they go into bankruptcy.
| JoeAltmaier wrote:
| Bankruptcy rules are weird, and it's not just crypto
| companies that work that way. Lots of uninsured companies
| could lose depositors' accounts in bankruptcy. Witness grain
| elevators, or storage companies, or safe deposit companies -
| it took special laws to protect depositors. Which protection
| Coinbase doesn't have, apparently.
|
| It's always more nuanced than first glance. And (rich)
| creditors have always had more sway in court than common
| depositors, unless special rules are enacted that say
| otherwise.
| olalonde wrote:
| It's weird indeed. I admit I believed there was a law that
| protected depositors (in general) from creditors in the
| event of a bankruptcy. Are you saying that there's a law
| that's specifically for grain companies, one specifically
| for safe deposit companies, etc.? What if you park your car
| in a garage which goes bankrupt, can you lose your car? I'm
| kind of mind blown right now...
| svnt wrote:
| Sorry to say it, but no, you.
|
| You are missing the point. The regulations on banking created
| and enforce those legally binding separations in assets that
| you are shocked don't exist.
| olalonde wrote:
| Seems like a more robust solution would be to just fix the
| bad bankruptcy laws instead of "regulating" every possible
| variant of "company has custody of X which is actually
| owned by customer Y". There ought to be a simple way to
| declare: "this is not company property and is off limits to
| company creditors in the event of a liquidation".
| prepend wrote:
| These aren't bad bankruptcy laws. They are actually good
| and protect things that are most important- bondholders
| and higher priority creditors.
|
| I don't think letting companies set their own creditor
| priorities would really be feasible if we want to have
| predictable securities markets.
|
| I assume that if we let companies protect certain assets
| from creditors during bankruptcy they would set aside
| massive bonuses and all sorts of other shenanigans.
| pandemicsoul wrote:
| I was on reddit and someone called bitcoin a "useful savings
| account" and I was like, "NO, STOP. Do not tell people this
| stuff is for savings!" I was downvoted to hell and people were
| like "lmao noob." Got into a back and forth where I was trying
| to delineate an investment and savings and people just kept
| replying stuff like, "it goes up, that means you beat
| inflation, do you not understand how this works???"
|
| Sigh.
| aaronbrethorst wrote:
| Tulip mania, indeed.
| AYoung010 wrote:
| Sadly, discourse on reddit has not been worth the time of day
| since 2015 or so.
| ricardobayes wrote:
| Unfortunately doubly true for their crytocurrency-themed
| subreddits with millions of followers where each and every
| post that isn't about 'number goes up' gets moderated. Even
| a post got deleted where the user warned others to invest
| carefully, only funds that they don't mind losing. Or posts
| where a user posts a proof of their losses.
| bckygldstn wrote:
| This depends very much on the subreddit. There are still
| some fantastic communities with top-notch discourse! On the
| other hand, I don't remember discourse being worthwhile on
| large subreddits even in the good old days of 2015.
| aaaaaaaaata wrote:
| > Few bank CEOs think that
|
| aloud.
| MaxfordAndSons wrote:
| I think you mean SIPC?
| prepend wrote:
| Yes, thank you. What's odd is I thought I typed that but
| autocorrect changed it and that's a bit concerning since it
| changed it to a pretty not cool term.
| seaourfreed wrote:
| If this was a brokerage with stocks, the customers own those
| stocks. There is no reason crypto shouldn't be the same. There
| is no reason crypto shouldn't have top priority to their
| owners. It isn't okay for a company to put other creditors
| above the owners of that crypto
| JumpCrisscross wrote:
| > _this was a brokerage with stocks, the customers own those
| stocks_
|
| Sort of. Most individuals' shares are held in "street
| name,"[1][2].
|
| You have a claim against the broker for those shares, but
| that could be impaired if the broker went under. Losses are
| rare because American brokers are highly regulated. Coinbase
| has fought vigorously against being similarly regulated [3].
|
| [1] https://www.sec.gov/fast-answers/answersstreethtm.html
|
| [2] https://www.sec.gov/reportspubs/investor-
| publications/invest...
|
| [3] https://www.marketwatch.com/story/coinbase-proposes-
| crypto-f...
| bombcar wrote:
| If you look closely you'll find that the broker and the
| holding company have similar but distinct names - it's
| supposed to be setup so that if the broker goes under the
| holding company can be transferred and continue.
|
| Similar to banks and FDIC the financial industry is good at
| this kind of thing and brokers can go bankrupt without
| customers ever really noticing.
| ceejayoz wrote:
| Stocks in brokerages are safe in part because the SIPC
| exists. Being a priority creditor doesn't help if, say,
| someone siphoned off all the Bitcoin.
| AdamN wrote:
| SIPC is just the framework. The primary thing is that
| customer assets are held in custodian accounts and not
| intermingled with the brokerage assets themselves. This is
| different than a bank which can lose your money if it does
| go bankrupt - it's just that FDIC steps in and makes whole
| the customers that qualify for the insurance (and pays out
| to other customers above the limits first before other
| creditors).
| Animats wrote:
| This is not entirely true, especially if you have a
| margin account.
|
| In the US, there is Government insurance up to the SIPC
| limit of $500,000 of securities and $250,000 of cash. But
| coverage ends at that point.
|
| I have had the annoying experience of having to pry
| restricted stock certificates out of the vaults of a
| failed broker. Fear of the regulatory agencies is strong
| enough that a week of phone calls produced the
| certificates.
| ceejayoz wrote:
| No, the SIPC, like the FDIC, can step in and make people
| whole if assets go missing. FDIC's for deposit accounts,
| SIPC is the equivalent for brokerage assets.
|
| https://www.sipc.org/about-sipc/sipc-mission
|
| "SIPC oversees the liquidation of member firms that close
| when the firm is bankrupt or in financial trouble, _and
| customer assets are missing_. "
|
| In Coinbase's case, holding in a custodian account
| doesn't save them if the Bitcoin in it gets sent to an
| attacker's wallet. They're just gone, and neither the
| SIPC nor FDIC cover that asset class.
| nradov wrote:
| You don't seem to understand how bankruptcy works. Creditor
| seniority is set by the court, following the bankruptcy code.
| The insolvent company has very little control over that
| process.
| core-utility wrote:
| > Since coinbase isn't FDIC insured
|
| Coinbase Pro _is_ FDIC insured, makes one wonder why Coinbase
| itself isn 't.
|
| https://pro.coinbase.com/?1416
| mupuff1234 wrote:
| Afaict only fiat holdings are FDIC insured (for both pro and
| non-pro).
| ceejayoz wrote:
| "All USD balances are covered by FDIC insurance"; most people
| aren't using them as a USD bank account. Crypto assets aren't
| covered by this.
| Alex3917 wrote:
| > most people aren't using them as a USD bank account.
| Crypto assets aren't covered by this.
|
| There are lots of people who keep USD there with open flash
| crash orders. Of course if Coinbase fails, the prices may
| basically flash crash to zero and your orders will be
| filled, and then you are no longer FDIC insured.
| core-utility wrote:
| Ahhh, good catch. Maybe it's time to buy a Ledger.
| Melting_Harps wrote:
| > Coinbase Pro is FDIC insured, makes one wonder why Coinbase
| itself isn't.
|
| This is exactly what those not familiar with Coinbase don't
| understand, the two systems are tiered and reflect that:
| Coinbase is by far the worst exchange experience, and they do
| not car about their customers unless they are Pro customers.
|
| This gives the average person with limited knowledge the
| worst possible UX into thinking this is how things are and
| likely deters them from ever trying againg when their order
| doesn't get completed because of some arbitrary reason.
|
| They did this to themselves, I can assure you this was a long
| time coming.
| [deleted]
| giancarlostoro wrote:
| > It's funny to see people shocked (SHOCKED!) when crypto
| doesn't have the protections of regular banking and
| investments. That's why you don't invest with stuff that isn't
| insured. Those aren't real rates, they are risk adjusted rates
| for not having insurance.
|
| You don't need to hold your crypto within coinbase, you can
| transfer it to a wallet you fully control.
| patricklorio wrote:
| Coinbase is FDIC insured but that's only relevant for USD. The
| SEC mandates disclosures of all risk and given that a crypto
| company like this has not gone bankrupt there, isn't precedent
| on how bankruptcy courts will consider crypto assets held under
| custody. Therefore it's a risk that should be made transparent.
| patrickthebold wrote:
| I'm not familiar with how any of this works, but I kind of
| thought coinbase was less like a bank--paying interest on
| deposits--and more like a user friendly web ui for managing
| your assets, because dealing with private keys is hard for a
| user.
|
| If, for example, Dropbox declares bankruptcy I'd be shocked if
| creditors could search through the user data for things of
| value.
|
| It seems like there would be plenty of money to be made just
| charging transaction fees and holding assets 1-1 for the users,
| but what do I know.
| chii wrote:
| > I'd be shocked if creditors could search through the user
| data for things of value.
|
| dropbox don't own any copyright to the content from the
| user's uploads. So even if the creditors find any valuable IP
| or content, there's no way they can claim ownership over it.
|
| Coinbase, on the other hand, is given custody of actual
| assets (the cryptos).
| pjc50 wrote:
| Check your cloud storage user agreements. A lot of them
| involve handing a perpetual irrevocable right to the data
| to the company storing it.
| prepend wrote:
| For purposes of operating the service. Not for
| commercializing IP.
|
| If I on Titanic and upload it to Dropbox. A creditor
| during bankruptcy couldn't use those rights to sell
| streams of Titanic.
|
| For coinbase, a creditor could sell the crypto stored.
| mattashii wrote:
| > Not for commercializing IP.
|
| Last time I checked it included commercializing IP, in at
| least Facebook and Twitter.
| ben_w wrote:
| The entire point of Twitter and FB is to commercialise
| the user content, IMO.
|
| While I wouldn't a priori assume any given cloud storage
| user agreement includes a perpetual IP license to
| anything the user uploads, I also wouldn't assume it to
| be free of such a clause.
|
| Either way, read closely. And get legal advice if it
| matters, because jargon doesn't mean what outsiders think
| it means.
| pyuser583 wrote:
| A while back Facebook was accused of requiring users to
| give them copyright "ownership."
|
| They said they wanted to be able to sue someone who
| scraped it. And that required ownership.
|
| Suing people for violating the copyright goes well beyond
| simple cloud operations.
|
| It means they can reach settlements, etc.
|
| It was less clear whether they could sue the author.
| riffraff wrote:
| they do both, you can earn interest on some things within
| coinbase, e.g. 4% interest on USDC (their stablecoin)
| [deleted]
| [deleted]
| lumost wrote:
| Surprised that customer positions aren't considered loans with
| first rights over all other lenders in a bankruptcy proceeding.
| The company shouldn't be playing around with these, but based
| on this statement it sounds like they are doing something odd
| and trying to run a fractional reserve system, or leveraging
| customer deposits for other high risk activity such that the
| money may not be there.
|
| Makes me think that I should move my crypto back to my own
| wallet/sell the crypto.
| post-it wrote:
| You probably should. You wouldn't give Coinbase your SSH
| private keys, crypto keys are no different.
| lumost wrote:
| They don't have my keys, but they are holding the asset as
| a custodian. From a practical perspective, I'm not certain
| they are actually holding my BTC in a dedicated wallet or a
| central wallet with an off blockchain ledger.
| svnt wrote:
| You should. Crypto is about to prove (again) why banking
| needs regulatory bodies.
| rmbyrro wrote:
| I think main issue is not lack of insurance. Stocks aren't
| insured, for example.
|
| Crypto being a novel space where no one truly understand its
| risks and that is (sadly, still) welcoming to scammers is the
| real issue, in my opinion.
| prepend wrote:
| Stocks are insured by SPIC. I'm not sure it's possible to
| find a US brokerage in business that doesn't insure stocks
| against this kind of loss in bankruptcy.
| rmbyrro wrote:
| I'm no specialist in the topic, but AFAIK you're insured
| for monetary funds held in a brokerage account.
|
| Stocks themselves don't need insurance from the brokerage,
| as they're in custody somewhere else. Depends on the
| country, I presume.
|
| What I meant is there's no insurance against the company
| you own going bankrupt. If you buy Tesla and it goes south,
| nobody will rescue your funds.
| shapefrog wrote:
| They could simply have a ringfenced seperate legal entity hold
| the customer funds. Begs the question, why not...
| syshum wrote:
| derbOac wrote:
| The only exception I might take to what you're saying is that
| one of the main reasons for crypto is resistance to central
| authority, so the emergence of a situation where something like
| this can happen should be edifying.
|
| It's not the first time this has happened; people seem to
| forget about Mt Gox.
|
| These exchanges need to be part of the crypto schema. Crypto
| theory is so focused on the chain and not the infrastructure
| that builds up around it.
|
| Anyway, I completely agree with what you're saying but it has
| special meaning when you're talking about something that's
| supposed to transcend the need for regulatory structures like
| FDIC.
| Melting_Harps wrote:
| > The only exception I might take to what you're saying is
| that one of the main reasons for crypto is resistance to
| central authority, so the emergence of a situation where
| something like this can happen should be edifying.
|
| Explain.
|
| > It's not the first time this has happened; people seem to
| forget about Mt Gox.
|
| False equivalence, MTGOX wasn't a Publically traded company
| with tons of VC money and lots of institutional funds (Ark et
| al) backing them; Mark embezzled funds and had horrible OPSEC
| that led to a massive hack. He tried covering this up,
| Coinbase reporting a massive loss is definitely not the same
| thing.
|
| > These exchanges need to be part of the crypto schema.
| Crypto theory is so focused on the chain and not the
| infrastructure that builds up around it.
|
| Coinbase has been the bane of the Bitcoin ecosystem since
| MTGOX folded. They are not a representation of what the
| 'Crypto' schema needs, in fact I'd argue CASH is a superior
| product in very conceivable way.
|
| And what exactly is Crypto theory, exactly?
|
| The Infrastructure was meant to be P2P, as noted in the White
| paper by Satoshi: exchanges are merely a response from the
| growing Market to cater to the increase in demand, and the
| truth is they still exist. Kraken, Binance, Gemini etc...
| still exist and will for some time. The number of exchanges
| isn't the issue in 'Cryoto land,' it's the scams and I'm glad
| Coinbase being a pusher of these worthless alts deserves to
| suffer. My worry is what happens to their BTC if they decided
| to unload to cover losses.
| derbOac wrote:
| > Explain.
|
| I wouldn't read into that comment (of mine) too much. I
| meant what I said in an abstract sense.
|
| > False equivalence, MTGOX wasn't a Publically traded
| company with tons of VC money and lots of institutional
| funds (Ark et al) backing them; Mark embezzled funds and
| had horrible OPSEC that led to a massive hack. He tried
| covering this up, Coinbase reporting a massive loss is
| definitely not the same thing.
|
| Fair enough; good point. They are different. But I do think
| these intermediary, exchange entities, whatever you want to
| call them, tend to emerge repeatedly, with their own
| vulnerabilities, in a way that isn't always fully
| recognized in a lot of the discussion of cryptocurrency. My
| sense (which could certainly be wrong) is there's a bit of
| a gap between blockchain-level issues and macroeconomic
| theory as it comes up in discussions of cryptocurrency.
|
| > And what exactly is Crypto theory, exactly?
|
| I just meant academic computer science - economic theory
| about cryptocurrency, like you might have in conference
| proceedings, academic journal articles, or technical papers
| openly distributed for critique and discussion. Maybe the
| sort of thing that might get discussed in formal policy
| reports by various public and private profit and nonprofit
| institutions.
|
| > The Infrastructure was meant to be P2P, as noted in the
| White paper by Satoshi: exchanges are merely a response
| from the growing Market to cater to the increase in demand,
|
| I think that's part of what I'm getting at. From the very
| beginning it's been clear to me people generally don't
| actually want pure cryptocurrency P2P in the sense they
| don't actually want to store the entire blockchain on their
| laptop. So these kinds of intermediary structures will
| emerge.
|
| > and the truth is they still exist. Kraken, Binance,
| Gemini etc... still exist and will for some time. The
| number of exchanges isn't the issue in 'Cryoto land,' it's
| the scams
|
| I don't mean to imply I have a problem with exchanges per
| se, it's that it would be nice if there was some kind of
| robustness built in surrounding them. Maybe fraud is
| inherent to all economic systems (people lose money all the
| time on traditional stock exchanges and in investment
| schemes), but it would be nice if there was something like,
| just say hypothetically, a higher-order layer akin to the
| FDIC etc (in the absence of the FDIC etc), but distributed
| or something? I just think these things aren't really well-
| worked out -- the idea that someone could exchange USD into
| crypto and then have it disappear because a central entity
| collapses is going against the grain of what crypto is
| supposed to prevent.
| sureglymop wrote:
| What i don't understand is why don't people create their own
| wallet and keep their funds there? Isn't that the entire
| purpose? Of course they could still use coinbase as an
| exchange. But if everyone let's another party "manage" their
| wallet in what way is it really decentralized...
| tablespoon wrote:
| > What i don't understand is why don't people create their
| own wallet and keep their funds there? Isn't that the entire
| purpose? Of course they could still use coinbase as an
| exchange. But if everyone let's another party "manage" their
| wallet in what way is it really decentralized...
|
| The _real_ purpose of Bitcoin is to speculate on the roller
| coaster. Everything else is basically woo that 's needed to
| fuel it. The "future of money" where people by their coffee
| with a super-secure private wallet is a lie.
| MomoXenosaga wrote:
| "Be your own bank". It is bullshit because nobody wants to
| bother with that just as nobody wants to bake their own
| bread.
| iamthirsty wrote:
| > The real purpose of Bitcoin is to speculate on the roller
| coaster.
|
| > Everything else is basically woo that's needed to fuel
| the speculative roller coaster.
|
| For _some_ people sure, but not all, and I would even go as
| far as to say not the main intention of the original
| product.
| tablespoon wrote:
| > For some people sure, but not all, and I would even go
| as far as to say not the main intention of the original
| product.
|
| It certainly wasn't the "main intention of the original
| product," but Bitcoin failed at that. A big part of that
| failure was the peculiar ideology that got baked in
| through many of its design decisions.
| jobs_throwaway wrote:
| > but Bitcoin failed at that
|
| what makes you say that? I use bitcoin to conduct private
| transactions regularly and its pretty darn solid for that
| purpose. Doing such a transaction over the internet,
| before bitcoin, required you to use permissioned rails.
| tablespoon wrote:
| > what makes you say that? I use bitcoin to conduct
| private transactions regularly and its pretty darn solid
| for that purpose. Doing such a transaction over the
| internet, before bitcoin, required you to use
| permissioned rails.
|
| Just because it can be used like that doesn't mean it
| actually succeeded. The vast majority of Bitcoin is held
| as a speculative investment, and the deflationary aspects
| are a strong disincentive to regular circulation.
| OOPMan wrote:
| And yet if a hundred million people tried to use it the
| way you do, the whole system would implode.
|
| A monetary system that only works if a small number of
| people use it is...not useful.
| danans wrote:
| > the main intention of the original product.
|
| AFAICT, the main intention of the original product was to
| undermine fiat currency, and by proxy, the institutions
| that are built on and support it, primarily governments
| and central banks but extending beyond that to broader
| societal institutions that use taxes and monetary policy
| as their tools.
|
| I'm not so sure it's done with that yet.
|
| The financial FOMO that fuels that goal just seems like a
| means to that end, and the climate damage from it's
| energy consumption seems like an (unintended?) second
| order effect whose problematic nature needs to be
| rationalized post hoc.
| patwolf wrote:
| It takes discipline to keep a wallet safe. I used to discount
| the risk of that, but over time I feel less and less
| confident in the average person's ability to not lose a
| wallet or have it hacked.
|
| To me Coinbase feels more like bank. Once I deposit money I
| no longer worry about the physical security of that money.
| Clearly that isn't the case given it's not FDIC insured, but
| the fact that it's a multi-billion dollar publicly-traded
| corporation instills some confidence.
| mellavora wrote:
| > To me Coinbase feels more like bank. Once I deposit money
| I no longer worry about the physical security of that
| money. Clearly that isn't the case given it's not FDIC
| insured, but the fact that it's a multi-billion dollar
| publicly-traded corporation instills some confidence.
|
| And that is the danger. It feels like a bank, and lots of
| other people also feel it is like a bank, so you figure you
| are safe.
|
| But it is not a bank. It does not offer the regulator
| protection of a bank. Feelings don't change that. A good UI
| does not change that. Only regulation change that.
| blihp wrote:
| Unless Coinbase is regulated like a bank or brokerage, what
| it feels like is irrelevant if you're in the U.S. Short of
| your deposits being FDIC or SIPC insured you know all you
| need to know: every cent and/or coin you have with them is
| at risk.
| AuryGlenz wrote:
| Early on I had some Bitcoin hacked from a wallet. That was
| before wallets even had passwords, if I remember correctly.
|
| I bought a hardware wallet years ago and then decided not to
| use it. If Coinbase goes down crypto as a whole will probably
| be brought under with it, so I'd rather have someone else
| manage it for me.
| apozem wrote:
| It's the obvious thing, convenience. Humans love convenience.
| People build billion-dollar businesses like Steam and Spotify
| that basically sell convenience.
|
| Makes sense that a lot of people just want an easy way to
| manage their crypto. If you're not ideologically dedicated to
| decentralization, why not do the easy thing?
| gigaflop wrote:
| You can 100% create and manage your own wallets on your own
| hardware. However, most exchanges have transfer fees, on top
| of whatever costs are incurred on the network by the
| transfer. And, if you want to sell on an exchange, you likely
| need to transfer the tokens into the exchange wallet anyways.
|
| If someone is buying crypto to hold it for years, then
| wallets and hardware keys and 12-word passphrases make the
| most sense.
|
| If you're not sure if you'll hold a coin for long, or are
| speculating, or have less than $5k on the exchange, it might
| not be worth the hassle (for the indeterminate 'you') to
| create and manage your own wallets.
| nybble41 wrote:
| > However, most exchanges have transfer fees, on top of
| whatever costs are incurred on the network by the transfer.
|
| Most might, but Coinbase does not. Outgoing transfers are
| free--they even cover the network fee. For incoming
| transfers the sender pays the network fee but there is no
| additional charge.
|
| It's a bit of a hassle to shift funds around, and not
| having your funds instantly available on the exchange
| limits your ability to take advantage of short-term
| opportunities, but in general I would still recommend self-
| custody over leaving "large" amounts of crypto on an
| exchange for very long. That's less due to the risk of
| bankruptcy and more due to the risk of the exchange getting
| hacked--practically speaking we have more real-world
| examples of the latter case, discounting bankruptcy
| directly resulting from a previous hack.
| mbesto wrote:
| Would you like to explain to my 70 year old mother that she
| should install a Chrome extension, transfer her coins to it
| and expect her not to lose that? Oh and then explain to her
| that she is going to print out a piece of paper with 12 words
| on it. That's her backup in case she loses everything...so
| "Mom, do not lose this piece of paper you're screwed!"
|
| Yes she'll figure that out easily!
| ahmetrcagil wrote:
| Maaaybe 70 y.o. moms should not invest in crypto then?
| nytesky wrote:
| Then crypto will never be the future of money. That's
| their point.
|
| But honestly, most HN uses password managers -- if crypto
| became primary currency, that would make hacking
| someplace like Bitwarden or Coinbase enormous world
| shattering honeypots -- like Nation state targets.
| svnt wrote:
| There's no future limit, it is just that the present UI
| is garbage. Grandma should wait.
| cnelsenmilt wrote:
| This and also arguably 70 year old moms are probably just
| fine at "don't lose this crucial piece of paper" given
| stuff like social security cards, birth certificates,
| savings bonds, and all the other bits that have been
| important pieces of paper for most of their lives.
| seydor wrote:
| > when crypto doesn't have the protections of regular banking
| and investments
|
| Coinbase is not 'crypto' though. Nobody's coins go down if one
| exchange crashes, unless they are careless enough to leave them
| there. The real problem is that cryptocoins are hard to use ,
| and so exchanges are used as banks (they shoudn't) . But that
| is something that tech can fix
| eatonphil wrote:
| I do wonder why he's allowed to say on Twitter there is no risk
| of bankruptcy [0]. While the risk could be minimal and maybe
| negligible saying "no risk" means zero chance. That can't be
| true of any company. For a public company ceo to say that,
| isn't that securities fraud?
|
| I guess even if it is fraud and they do get prosecuted by the
| SEC they'd just get fined for it. And maybe the fine here would
| be much less than the price of a run on coinbase.
|
| [0]
| https://mobile.twitter.com/brian_armstrong/status/1524233602...
| misja111 wrote:
| There are all kinds of way out of this in case he would get
| sued: he could say that with 'there is no risk', he just
| meant shorthand for 'there is no more than a negligible
| risk'. Or he could say that with 'there is no risk' he was
| merely expressing his strong personal opinion based on the
| vision and faith he had in his company.
| somenewaccount1 wrote:
| Officers of a company are held to a different standard when
| it comes to public statement.
|
| Declaring it as personal opinion would not likely absolve
| him. 'Funding Secured' was also a personal believe, from
| the SEC standard it had to be substantiated in a meaningful
| way though, or gets fined.
| devin wrote:
| "everything is securities fraud" --Matt Levine
| eatonphil wrote:
| You can see I read him too much.
| maxerickson wrote:
| If you don't have significant liabilities you can't really go
| bankrupt.
|
| (I didn't look to see if that was the case, just making the
| point in general)
| kolbe wrote:
| Every single user account is a liability.
| TheOtherHobbes wrote:
| Every single user account is an IOU.
|
| There is - as some people seem likely to discover - a
| difference.
| kolbe wrote:
| The vast majority of bankruptcy courts place customer
| accounts ahead of creditors.
| IfOnlyYouKnew wrote:
| They just posted a quarterly loss of $430 million.
| maxerickson wrote:
| Okay, but that isn't a liability in an accounting sense,
| it is a cash flow.
|
| Edit: looking at the 10K, other than customer assets
| (where they have a net holding), they have like $6
| billion in cash and equivalents against less than $5
| billion of debts and other obligations).
|
| So if they shut it all down, there would be funds left
| over.
| WJW wrote:
| Would that be 5 billion in customer assets and associated
| liabilities, leaving about 1 billion of equity for
| Coinbase? At a burn rate of 430 million per quarter that
| only leaves a runway about 7-8 months.
| maxerickson wrote:
| No, I left custodial holdings out of those numbers.
|
| The dead reply to my comment at the top of the thread
| makes a good point that loss of the custodial holdings in
| a hack would bankrupt them.
| AdamN wrote:
| Wouldn't a hack of the custodial holdings just mean their
| customers lose their money but the business is otherwise
| a going concern (for that few moments until everybody
| stops paying them)?
| lazide wrote:
| They get a lot/most of their money from fees with ongoing
| transactions. If you look at the '5 minutes ahead'
| picture if there is a hack that either 1) steals all
| customer assets, or 2) requires them to freeze all
| activity for a serious length of time, it's a 'no longer
| going concern' type situation.
|
| No transactions? No income. No trust/willingness for
| people to continue doing transactions? No future income.
| JumpCrisscross wrote:
| > _they have like $6 billion in cash and equivalents
| against less than $5 billion of debts and other
| obligations...if they shut it all down, there would be
| funds left over_
|
| Every company that ever went bankrupt had more assets
| than obligations before they went bankrupt.
|
| Coinbase's quick ratio [1] adjusted for custodial assets,
| as of 31 March 2022, was 6.6 [2][a]. That's good. Don't
| adjust for custodial funds, and it's 0.15. Virtually
| bankrupt. With $6.2bn cash on the balance sheet and
| $830mm cash burned by operations in Q1, they have over 2
| years of runway assuming Q1's terribleness continues.
| That's good. But were they to suffer a hack, that margin
| of safety could rapidly collapse. And in that case,
| customers could be left behind secured lenders. (Where
| USDC holders would wind up is a mystery.)
|
| [1] https://www.investopedia.com/terms/q/quickratio.asp
|
| [2] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/
| 89c60d8... _page 5_
|
| [a] _(6,116,388, cash and cash equivalents + 346,048,
| accounts receivable + 1,333,333, crypto assets held) /
| (10,921,823, current liabilities - 9,742,961, custodial
| funds due to customers)_
| ricardobayes wrote:
| What this means in layman's terms if they don't dip into
| custodial funds they can't cover their current
| liabilities?
| maxerickson wrote:
| Right, I compared cash to liabilities, not assets.
| ragnot wrote:
| Could you explain how you got 0.15? (6,116,388, cash and
| cash equivalents + 346,048, accounts receivable +
| 1,333,333, crypto assets held) / (10,921,823, current
| liabilities) = 0.71
| formerkrogemp wrote:
| On paper, you have and can report a lot of assets.
| However, many companies go bankrupt with current ratios
| greater than one with either overinflated or overvalued
| assets or undervalued or understated debts or some
| combination. Financial reports a la 10-Ks and 10-Qs are
| 'boring,' difficult for most people to read, contain
| specialized jargon, and contain significant lag time
| where a going concern is, well, a concern. Audits are
| almost always annual and not quarterly. Disclosures may
| be required, but they can be broad or nonspecific enough
| as to delay broader acknowledgement of bankruptcy level
| problems. I'd take information from financial reports
| with a bit of salt, even if they are often our best, or
| only, source of information.
| maxerickson wrote:
| If "cash and cash equivalents" is wrong, that's fraud,
| not something I should have taken with a grain of salt.
| [deleted]
| Proven wrote:
| Nonsense. They can get hacked or introduce a bug into their
| stack and go bust in under an hour. That's extremely
| unlikely, but not impossible.
| blagie wrote:
| I would say that's extremely likely. Make a list of your
| favorite tech companies from 1990 or 2000, and see how
| many still have technology teams qualified to tie their
| own shoelaces today, exist, and haven't turned into
| sleazeware companies.
|
| You can calculate your annualized failure rate. That's a
| best-case on the odds your funds will continue to exist
| next year. Move fast / break things / fail fast /
| developer sprints / etc. speeds this process up even
| further. Crypto companies also have a giant target
| painted on their backs for hackers (including rogue
| state-level actors, some of whom just had large sums
| confiscated by Western institutions).
|
| Tulips, anyone?
| toong wrote:
| Just like it was for all the other crypto brokers that
| went down, exactly like that ;-)
|
| I might tone it down just a bit to "Somewhat unlikely to
| happen. Today."
| superkuh wrote:
| Do you think it would be okay for him to say there's no risk
| of bankruptcy to some friends in a public bar? How about at a
| BBQ in his backyard? Would it be okay for him to say this on
| a flyer stapled to a public board?
|
| Why is twitter special?
| JumpCrisscross wrote:
| > _Why is twitter special?_
|
| The SEC's Rule FD [1].
|
| [1] https://www.sec.gov/news/press-release/2013-2013-51htm
| BolexNOLA wrote:
| If I was a CEO and saw how few and far between (as well as
| toothless) the repercussions have been for Elon Musk, I
| wouldn't fear tweeting whatever I wanted either.
| formerkrogemp wrote:
| If you were a CEO, you'd often be set up for life with some
| level of financial prudence, and everything else after
| achieving that level of wealth seems like it'd just be for
| a lark or some pursuit of satisfaction/happiness.
| BolexNOLA wrote:
| Honestly I was being somewhat tongue-in-cheek, but I
| guess it didn't go over well. Lesson learned.
| mrtranscendence wrote:
| To be a bit pedantic, there are CEOs of all sorts of
| organizations, many of which are tiny nonprofits that
| bring in very little money. You could be a CEO and bring
| home $60k a year.
| thesuperbigfrog wrote:
| >> For a public company ceo to say that, isn't that
| securities fraud?
|
| Cryptocurrencies are not regulated securities.
|
| What laws protect cryptocurrency "investors"?
| kasey_junk wrote:
| Coinbase shares are a regulated security. The poster is
| suggesting that the statements by the CEO are securities
| fraud for those shares not for crypto.
| rchaud wrote:
| Coinbase is publicly traded, OP is clearly referring to
| securities fraud as it relates to public statements that
| could have material impact on Coinbase stock.
| lallysingh wrote:
| Their product isn't regulated, but the company is still
| subject to securities law as it's public.
| nradov wrote:
| The SEC can't prosecute anyone, they have no criminal
| enforcement power. However they can bring civil actions for
| fraud or other violations of securities law, and refer
| criminal fraud cases to the Justice Department.
| eatonphil wrote:
| Thanks for the clarification, makes sense.
| mmazing wrote:
| Does _anything_ have a zero chance of happening?
| gitfan86 wrote:
| He probably has a disclaimer somewhere saying his tweets are
| "not forward looking statements" so he is only saying that as
| of right now in this moment there is no risk of bankruptcy
| RugnirViking wrote:
| I wouldn't be sure what the man on the clapham omnibus
| thinks of that kind of disclaimer. He'd be exposing himself
| to considerable risk by relying on it
| jjgreen wrote:
| The last time I was on a Clapham omnibus, there was an
| old chap in the back seats in the process of taking his
| trousers off
| rebuilder wrote:
| Ah, an institutionalized investor.
| arbitrary_name wrote:
| But obviously recently escaped from the institution, if
| he is on the omnibus...
| IMTDb wrote:
| Couldn't the same be said of _any_ company that isn 't
| currently filing for bankruptcy ?
| Cthulhu_ wrote:
| I mean with over 250 billion in assets managed, they should be
| able to get bought out and / or attract investors instead of go
| bankrupt. I'm sure there's rich folk who have an interest in
| owning an established crypto exchange.
|
| Although on the other, with that much in assets, there may also
| be people with an interest in having it go bankrupt - or just
| to spread these rumors, to further help crash the price of
| crypto.
| cm2187 wrote:
| FDIC insurance is for banks, not brokers. I think what protects
| you from a broker going bust is the separation of client money
| from firm money. Though I think that separation failed in the
| most recent major broker bankruptcy (MF Global) and probably
| many others. FDIC would protect the broker against its own bank
| going bust (though I am sure there are guarantee caps).
| kasey_junk wrote:
| All client assets were returned during the MF Global
| bankruptcy.
| 2OEH8eoCRo0 wrote:
| It's funny but if crypto really does crash you can bet that all
| of us will be paying for it one way or another.
| shoulderfake wrote:
| tablespoon wrote:
| > Since coinbase isn't FDIC insured, it makes sense that if
| coinbase goes bankrupt, the customer currencies will go away as
| well. And they aren't SPIC insured in the situations where
| crypto is a security.
|
| Is Coinbase "loaning" out the Bitcoin users have deposited in
| it?
|
| The reason banks need the FDIC is that they loan your deposits
| out instead of throwing it in a vault and sitting on it, so if
| they go under they don't have those assets to distribute in a
| bankruptcy. Given how immature and non-economic cryptocurrency
| is, it wouldn't surprise me if Coinbase _was_ sitting on all
| /most of its users desposits. So it's possible the users might
| get most of their deposits back after a bankruptcy proceeding
| (assuming the reason wasn't massive theft of assets or
| something).
| svnt wrote:
| If they were conservatively minded or playing it safe, the
| highest probability is that they left or lost a long time
| ago, or they haven't entered yet. Coinbase won, effectively,
| which means they are well beyond taking a cut of transactions
| and calling it good.
|
| The statement from the CEO is to prevent a run. Why do they
| need to prevent a run if they aren't farming the float?
|
| The only other option is "we make our money on trades"
| however, and especially in the bigger coins, trades are
| expensive, and not happening as often as they would like.
| They would (and will, if it comes to light) likely argue that
| it would be violation of their fiduciary duty to allow the
| custodial accounts to just sit there not making money.
|
| If exchange revenue data are public this could probably be
| figured out based on comparing transaction flow and revenue.
| My money is they are dependent on float, and probably also
| directly or indirectly using it to front-run. It is SOP for
| finance.
| ceejayoz wrote:
| > The statement from the CEO is to prevent a run. Why do
| they need to prevent a run if they aren't farming the
| float?
|
| Users/holdings going down aren't good for the company and
| stock, even if a run doesn't hurt them financially.
|
| Coinbase claims not to do anything with deposits:
| https://help.coinbase.com/en/coinbase/privacy-and-
| security/o...
| retcon wrote:
| I think your statement about the idea that Coinbase isn't
| living on the float about as likely as the notion that nobody
| in crypto is desperately trying to create a fiat currency
| fiefdom. As such, your views come across as the kind of
| statement that are illegal to distribute concerning regulated
| investment.
| tablespoon wrote:
| > As such, your views come across as the kind of statement
| that are illegal to distribute concerning regulated
| investment.
|
| What kind of nonsense is that? I'm just some rando on the
| internet.
| jpmattia wrote:
| deleted erroneous comment about shorting on Coinbase.
| rubyn00bie wrote:
| How do you short a coin on Coinbase? I have never seen the
| option nor heard reference to it. It sounds like you're
| just assuming this is how it works to me but I'd prefer to
| be wrong and learn something.
| bragr wrote:
| It seems you can no longer directly short on Coinbase but
| they still offer options contracts that let you bet the
| price will go down.
| jpmattia wrote:
| Whoops, it turns out it's tokenized, not an actual short.
| I'll delete the comment (really edit, since delete is now
| removed.)
|
| https://www.coinbase.com/how-to-buy/1x-short-bitcoin-
| token
| rileyphone wrote:
| No, but the users would be last in liquidation preference, so
| would end up screwed anyways.
| tablespoon wrote:
| > No, but the users would be last in liquidation
| preference, so would end up screwed anyways.
|
| Cite please, because if true that would be mind-boggling.
| sdenton4 wrote:
| Welcome to capitalism! The billionaires always eat first.
| And don't you forget it.
| aaronbrethorst wrote:
| _The billionaires always eat first_
|
| And possibly second and even third, depending on
| liquidation preference terms.
| nmfisher wrote:
| Pithy, but also not true. If a bank goes belly up, your
| average Joe's bank account is first in line (via deposit
| insurance), as are employee entitlements.
|
| Coinbase is most decidedly not a bank, which is why the
| former doesn't apply.
| prepend wrote:
| Actually bond holders eat first in US bankruptcy law.
| Then employees, and shareholders last. So in this case,
| under capitalism, billionaire investors eat last. [0]
|
| [0]
| https://www.investopedia.com/ask/answers/09/corporate-
| liquid...
| mellavora wrote:
| not so mind boggling, if you regard it as any other
| company.
|
| Say you ordered a pair of jeans from Sears, via the
| catalog. And unfortunately your cash transfer cleared on
| the day they went bankrupt.
|
| They owe you a pair of pants, or your money back if they
| cannot deliver the product you ordered.
|
| They also owe their employees money, if they have not
| issued payroll yet for that month.
|
| They also owe their bondholders money.
|
| They may have also taken out bank loans.
|
| You, as the client, are in line behind the employees and
| bondholders and other creditors.
|
| probably last in line.
|
| In which case you've lost your pants.
| derekp7 wrote:
| What if you received your pants, but they were defective
| so you sent them back to be repaired? Do you then lose
| them during bankruptcy, and they get auctioned off?
| JumpCrisscross wrote:
| > _you sent them back to be repaired_
|
| You will probably get them back, but that is far from
| guaranteed [1].
|
| [1] https://www.nytimes.com/1991/02/23/news/if-a-shop-
| closes-wit...
| SkipperCat wrote:
| I think a shirt would have been more apt. As in, Coinbase
| blew up and I lost my shirt....
| tablespoon wrote:
| I get that's true in some situations, but is it true in
| all cases? Say I rent a safe deposit box, put valuable
| personal property in it, and the bank goes bankrupt. Does
| the bankruptcy court sell the box-holders' personal
| property until the bondholders are made whole?
|
| It seems like depositors should be one of the first in
| line, certainly before bondholders.
| jmathai wrote:
| The difference here is that the bank never has any
| ownership of what's in the safe deposit box.
|
| When you buy crypto with coinbase, they hold that crypto
| in a custody account they have keys to. It's not
| guaranteed how the court would rule on distributing those
| assets in case of bankruptcy.
|
| From the article "it is possible, however unlikely, that
| a court would decide to consider customer assets as part
| of the company in bankruptcy proceedings even if it
| harmed consumers".
| barkingcat wrote:
| coinbase has the decryption keys to the wallet, so they
| have full control over the currency.
|
| users of coinbase never "owned" or "have" anything. You
| gave money to coinbase, they have the money now.
|
| If you had the decryption key offline, then you could
| control the cryptocurrency.
|
| this is cryptocurrency 101 - the very basic nature of the
| blockchain itself guarantees whoever has the key to have
| ultimate control.
|
| Coinbase is not a bank, they don't have to give you
| anything.
| pavlov wrote:
| The property in the box was never the bank's property.
| They're just renting a space for you to keep your stuff.
| In a bankruptcy, that contract could be sold to a third
| party who takes over the management of the boxes, but the
| contents are yours.
|
| When you send money to Coinbase, it's not like that. This
| latest disclosure makes it clear assets held at Coinbase
| (or other exchanges) aren't yours in any sense.
| nybble41 wrote:
| When you get right down to it, as a purely virtual asset
| the crypto isn't _anyone 's_ property. Coinbase holds
| some keys which give it the ability to sign transactions
| on the blockchain, a _service_ which has value. They owe
| their depositors the service of signing such a
| transaction on request transferring some quantity of
| deposited crypto to a suitable withdrawal address; the
| value of this service to the customer is the market value
| of the crypto. However, it does not seem likely to me
| that this service Coinbase owes to its depositors would
| be prioritized over their other debts, especially if that
| meant selling off other property to buy crypto so they
| could complete the transfers.
| sulam wrote:
| This is literally the topic of the article.
|
| "the exchange noted that in the event it ever declared
| bankruptcy, "the crypto assets we hold in custody on
| behalf of our customers could be subject to bankruptcy
| proceedings." Coinbase users would become "general
| unsecured creditors..."
| withinboredom wrote:
| I guess it depends on if those balances are kept on the
| books as "assets" or not. They may be subject to money
| transfer laws though, in which case they can't spend ANY of
| the deposits.
|
| Each US state has their own laws, and I'm sure some of them
| are vague enough to not specify the currency in order to
| regulate transfers of foreign currencies... so that could
| get interesting if anyone notices that they are money
| transfer services...
| JumpCrisscross wrote:
| > _if those balances are kept on the books as "assets" or
| not_
|
| Yes, they appear as a "customer custodial funds" current
| asset and "custodial funds due to customers" current
| liability on Coinbase's balance sheet [1]. Under current
| law, Coinbase's customers have a claim to those assets.
|
| Look at a brokerage's balance sheet, on the other hand,
| and you see special line items for segregated cash and
| securities. If a broker-dealer goes under, "it ordinarily
| is liquidated under SIPA, not the Bankruptcy Code," where
| the SIPC "asks a federal court to appoint a trustee to
| liquidate the firm and protect its customers" [2]. The
| first priority is customer assets. Creditors second.
| Coinbase isn't similarly regulated, in part because it
| has fought tooth and nail against being needed to.
|
| [1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/
| 89c60d8... _page 5_
|
| [2] https://www.mondaq.com/unitedstates/investment-
| strategy/6631...
| dragontamer wrote:
| > Is Coinbase "loaning" out the Bitcoin users have deposited
| in it?
|
| Maybe not Bitcoin, because I don't know if Bitcoin has any
| staking protocols in it.
|
| But things like Anchor / UST / Luna participated in a staking
| scheme, where if you promised not to sell UST, you'd get 20%
| APY gains (measured in UST of course, not US-dollars).
|
| Coinbase could be participating in those schemes in a group
| wallet-setting. Ex: UST holdings at Coinbase would be staked,
| so that Coinbase would get those gains. Or with other coins
| with such benefits??
|
| I'm mostly pulling this out of my ass btw. I don't know the
| structure of Coinbase. But I can see the "incentivizing" from
| the various cryptocoins on the market or the various
| "protocols" that allow for exponential growth (as long as you
| "lend" or "stake" your coins somewhere else).
| freefolks wrote:
| There are many issues here. First is all the crypto that
| coinbase must hold in order to facilitate trades. If they
| do not have the inventory, they must source elsewhere.
| Second is customer funds (cash) which is what they need to
| facilitate a fiat exchange for crypto for their markets.
| I'm not exactly sure how their operations work but in a
| regular stock brokerage, these are segregated from their
| own cash although in 2010 an incident was shown that even
| segregated customer funds are not so segregated.
|
| The risk here is always the same. Liquidity in terms of
| cash. I dont believe there is any regulation stopping
| coinbase from using or investing customer cash or anything
| preventing them from acting as a hedgefund (leveraging that
| cash) to make investments using customer funds. The real
| risk is there. If they are using crypto as collateral to
| make investments that are tanking in value, while crypto is
| tanking in value, they'll be forced to post more collateral
| in the form of cash or be forced liquidated to take a loss.
| Insolvency leads to bankrupcy.
| caylus wrote:
| While I agree making a bad loan is the most likely reason for
| a bank to lose deposits, I wouldn't go so far as to call it
| "the" reason.
|
| Robbery, embezzlement, or natural disaster [1] can also
| result in loss of funds that would be covered by FDIC, and
| those risks exist for cryptocurrency too, albeit in somewhat
| different forms.
|
| [1]: see this paper, which found that "disaster damages play
| a significant role in bank failures":
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2506710
| bubbleRefuge wrote:
| bad loans have nothing to do with loosing deposits at
| banks. see post below.
| Kranar wrote:
| FDIC does not protect against robbery, embezzlement,
| identity theft, or natural disasters.
|
| Your source is not about a natural disaster resulting in a
| bank losing its funds, but rather that areas that are
| impacted by a natural disaster often experience economic
| suffering, such as businesses defaulting on loans, that
| eventually leads to bank failures.
| danans wrote:
| > Is Coinbase "loaning" out the Bitcoin users have deposited
| in it?
|
| I don't understand how they would loan it out. What
| denomination/form will the loan be transferred in? Bitcoin?
| If so, how are they creating the Bitcoin to loan out?
|
| They can't take it out of their depositors' wallets because
| by design that would result in a lower balance for the wallet
| on the blockchain.
|
| They can't make a copy because Bitcoin prevents double
| transactions. Likewise, Bitcoin can't be "created" like banks
| create fiat currency on their balance sheets.
|
| If they are loaning out fiat cash fractionally backed by
| depositors' Bitcoin, who are they borrowing that cash from,
| and how can they guarantee to their creditors that the
| Bitcoin backing the loan are available as collateral?
|
| Would they take their users' wallets' private keys to pay in
| the event of a default?
| nullc wrote:
| Their depositors wallets aren't "on the blockchain" -- if
| they were, they'd be in the the depositors custody not
| coinbase's.
|
| Their users balances are just entries in a database at
| coinbase. Users expect that coinbase holds coins to back up
| those balances, but there is no proof of it.
|
| Last I checked coinbase doesn't participate in any proof of
| solvency protocols so there is no way to know if customer
| balances exceed their holdings.
| danans wrote:
| > Their depositors wallets aren't "on the blockchain" --
| if they were, they'd be in the the depositors custody not
| coinbase's.
|
| If the users' wallet values are really just database
| entries referring to some miniscule portion of the mega-
| wallet whose private keys are actually owned by an
| exchange, then what's the point of using the blockchain
| at all?
|
| What is the value provided by exchanges other than an
| asset database that (hopefully) has bank-level security?
|
| Just a way for regular folks to speculate on
| cryptocurrency?
|
| Couldn't that function be equally served by some kind of
| high-risk brokerage account that has a crypto investment
| option?
| bubbleRefuge wrote:
| Banks do not loan out deposits . This is a misunderstanding
| of modern banking. In modern banking systems, loans create
| deposits. Banks create loans out of thin air. In order to
| make loans they must have appropriate capital ratios. Bank
| deposits are a liability. When a bank deposit is debited,
| either via a withdrawal, check, or other transaction, it is
| settled using reserves. Reserves are federal money that is on
| deposit in accounts which banks have at the Federal reserve.
| Banks pay each other via interbank reserve settlements. Banks
| only maintain a minimal amount of reserves on deposit(Reserve
| Requirements). They can borrow reserves from the Fed if
| needed.
| 300bps wrote:
| _Since coinbase isn't FDIC insured, it makes sense that if
| coinbase goes bankrupt, the customer currencies will go away as
| well._
|
| No, it doesn't make sense at all. It is incredible to me that
| _these are all solved problems in traditional finance_.
|
| Coinbase could utilize the services of a custodian to hold the
| crypto. In fact, that's what any responsible financial services
| company would do. It makes perfect sense because if there is a
| dislocation in crypto, it could bring Coinbase down but it
| won't bring Bank of New York down. So hold all the customer
| crypto at Bank of New York.
|
| Or they could have individual wallets titled to customers. More
| difficult and doesn't allow them to do off-chain transfers but
| possible.
|
| There are a million ways to do this, this is a solved problem
| in finance. Coinbase chose not to do it and now is paying for
| that by having to disclose the truth - retail customers are
| screwed if Coinbase declares bankruptcy. Whose fault is that?
| The CEO apologizes for it so that should tell you.
|
| >For our retail customers, we're taking further steps to update
| our user terms such that we offer the same protections to those
| customers in a black swan event. We should have had these in
| place previously, so let me apologize for that.
|
| https://nitter.net/brian_armstrong/status/152423348004071014...
| kasey_junk wrote:
| Coinbase looks more like a brokerage to me than a bank. While
| SPIC insurance covers some of your assets the bigger protection
| comes from brokerage rules around segregating user funds from
| company funds and the expectation of the courts that those
| funds won't be used to settle company debts.
|
| So it is a little surprising to me that crypto assets wouldn't
| be treated similarly, which is probably why the SEC is
| demanding this disclosure.
| mathattack wrote:
| Banks have rules around commingled funds (banks can't gamble
| with customer accounts) but this doesn't look like a bank.
| hbrav wrote:
| > expectation of the courts that those funds won't be used to
| settle company debts
|
| I'm not sure if this is really the case, but I was under the
| impression that brokerages held the customers securities in
| trust. i.e. there is not merely a norm that they will not be
| used to settle debt, but it would be illegal for them to be
| used to do so.
|
| If anyone knows more about brokerages and whether this really
| is the case, I would be very interested to know.
| mbreese wrote:
| _> So it is a little surprising to me that crypto assets
| wouldn't be treated similarly, which is probably why the SEC
| is demanding this disclosure._
|
| I only know what I read from the article.
|
| But for me, it seemed like the disclosure was required, not
| because the crypto funds _would_ be used to settle company
| debts, but rather, this has never been tested in court. So,
| it's highly likely that customer accounts would be protected
| in a crypto bankruptcy, but we don't have any precedent on
| it, so we don't _know_ this to be the case.
| phkahler wrote:
| >> Since coinbase isn't FDIC insured, it makes sense that if
| coinbase goes bankrupt, the customer currencies will go away as
| well.
|
| No it doesn't. Well if coinbase is lending crypto like a bank
| then sure. But if they are acting like a stock broker, they
| should be holding real assets on behalf of customers and those
| assets should go to the customers who actually own them.
|
| Longer term investors can actually (could? it's been a while)
| get their stock certificate mailed and hold it themselves.
| svnt wrote:
| They are acting like what is best for them, which is neither.
| They are taking as much as they can because that is how
| finance works.
|
| For being on HN this post is confusingly full of people who
| assume tech companies are run for the public benefit, or at
| least with some moral obligation of protecting your assets.
| _Algernon_ wrote:
| This boils down to the "not your keys not your coin" mantra
| that's often repeated in the cryptocurrency community. It is
| possible to move your coins to your own wallet and manage them on
| your own. This comes with risks (eg. lost keys). Keeping them on
| exchange comes with different risks.
|
| Anyone holding significant amount of cryptocurrencies should
| consider the risks of each choice, make an informed decision, and
| live with the risk that entails. If that's too scary, then you
| probably shouldn't be in this market.
| azinman2 wrote:
| So if I wanted to move stuff to my own wallet, what's the best
| way to do that these days? Anything that can support more than
| just Bitcoin?
|
| I assume I'd just stick any private keys in a password manager
| vault that I already trust, and/or Yubikey. I'm not sure I
| trust the dedicated hardware wallets as that seems more prone
| to failure than a pure software approach.
| sschueller wrote:
| Most hardware wallets use the same standard to generate your
| keys (BIP39, BIP32 and BIP44 I think) from a long recovery
| phrase of words. So you could for example restore your wallet
| in a wallet software if your hw wallets dies. As long as you
| have all the words and the correct order you should be able
| to restore your funds somewhere else.
| azinman2 wrote:
| But at that point I effectively don't need the hardware as
| I've stored these words elsewhere.
| mattwilsonn888 wrote:
| This should either be so obvious it doesn't have to be said at
| all, or so important to those unaware that its the top comment.
| Somehow HN failed both of those but given their predilections
| on 'crypto' I'm not surprised.
| tmountain wrote:
| This feels similar to buying a stock's street name (a proxy for
| the actual share) vs directly registering a stock in your name.
| A key selling point of crypto has always been eliminating
| central control. If someone else is managing your keys, it's a
| given that they'll borrow against those entries in one way or
| another (putting the money to work so to speak). Risk
| assessment depends on which someone thinks is more likely, a
| lost key, or a default. We are living in some pretty wild times
| given that the later may trump the former.
| kasey_junk wrote:
| In the case of cede & co going bankrupt (a nearly impossible
| thought) your street side shares would not be used to settle
| their debts. You don't need direct registration for that
| protection. The same is true for your brokerage.
| chaosbolt wrote:
| I'm almost sure Coinbase practices fractional reserve and other
| forms of market manipulation, let's see how that bank run works
| for people.
|
| Some examples:
|
| - NuCypher goes up quickly on binance (a few months ago)
| because a whale is buying there, lots of people try to withdraw
| on CB to sell on binance, withdrawals start off working but
| then get locked for 5 hours straight, reddit and other social
| media had people complaining, no explanation given by CB, just
| technical issues as always.
|
| - Try to sell a few tokens a few weeks ago, it doesn't allow me
| to put big orders, instead they make me do it in multiple
| times, in which time the bots (some of which are theirs), front
| run me and instead of sell at a 5% lower price in one hit I
| lose 10% just waiting for the UI to allow me to make small
| order after small order.
|
| - Always blocking withdrawals in the most suspicious moments
| imaginable, just happened to me 3 days ago trying to withdraw
| USDC, had to wait an hour until that "unexpected error
| occurred" disappeared.
|
| - Human greed, why would they be different from the banks? I
| see most people don't withdraw their coins, I lend their coins
| for interest and profit from it, shareholders are happy, I sell
| my stocks and make money, if a bank run occurs I'll declare
| bankruptcy or ask the government for help because like a bank
| if my customers lose their money they might become unhappy and
| cause the government problems (Coinbase will eventually become
| a bank if crypto hype keeps growing).
| einpoklum wrote:
| > I'm almost sure Coinbase practices fractional reserve
|
| I'm not a crypto guy, so excuse the naive question: Can
| coinbase loan out money without actually transferring some
| sort of single-ownership keys for the amount loaned? If so,
| then indeed, they should be able to engage in fractional
| reserve "banking".
|
| > and other forms of market manipulation
|
| Modern money markets are based on fractional reserve banking.
| That's how most money gets created these days. I'm no fan of
| the prevailing economic system but it isn't some manipulation
| which moves you away from some pristine state.
| uncomputation wrote:
| The issue isn't that modern banks all do this. It's that
| crypto was supposed to be different, a response to the
| financial crisis where people were affected that didn't
| even gamble on housing, a way to truly own and prove your
| money is your money.
|
| > Modern money markets are based on fractional reserve
| banking
|
| Bitcoin was developed to solve this.
|
| > That's how most money gets created these days
|
| Bitcoin is a deflationary asset. It's not supposed to be
| "made" because a bank/Coinbase says so, but only via
| mathematical proof of work.
|
| > I'm no fan of the prevailing economic system but...
|
| Satoshi wasn't either. That's why he made Bitcoin. If the
| argument for Bitcoin becomes "it sucks but we need banks to
| lie to us for the economy" then there is no core argument
| for Bitcoin.
| einpoklum wrote:
| > crypto was supposed to be ... a response to the
| financial crisis where people were affected that didn't
| even gamble on housing, a way to truly own and prove your
| money is your money.
|
| I really don't see how that is the case. In fact, there
| is no such thing as "truly owning" things. Ownership is a
| social construct.
|
| > Bitcoin ... is not supposed to be "made" because a
| bank/Coinbase says so, but only via mathematical proof of
| work.
|
| Well, so is, say, gold, but once it seems some
| significant use as money, financial institutions start
| dealing in debts-of-gold, or debts-of-X, which _are_
| supposed to be made because a bank/Coinbase says so.
|
| > Satoshi wasn't either. That's why he made Bitcoin.
|
| I dunno, it seems like he started Bitcoin to get filthy
| rich off of a pyramid scheme, which he has. Wikipedia
| estimates "his" worth at 73 Billion USD in BitCoin.
| Although.... it's BitCoin, so maybe it's not really worth
| that much.
| legalcorrection wrote:
| Bitcoin has no opinion on fractional reserve banking. If
| entrust your assets to someone else, your contract with
| them can specify what they do with those assets until you
| ask for them. If you don't like that, find someone else
| to hold your assets who doesn't ask for those terms, or
| hold your assets yourself. But then you become
| responsible for preventing theft and destruction.
| _Algernon_ wrote:
| > It's that crypto was supposed to be different
|
| It is different. Nothing is stopping people from moving
| their crypto from the exchanges, and at least with crypto
| people have the opportunity to do that. What hasn't
| changed is human behavior and our affinity for the path
| of least resistance.
|
| No technology is going to change that.
| JBSay wrote:
| Money is not created through fractional reserve banking.
| Money is loaned into existence by commercial banks.
| Similarly Coinbase can sell you coins which don't exist.
| Like a bank it doesn't have to make good on this IOU until
| you withdraw your funds.
| redisman wrote:
| Mt. Gox take N! I wish I could withdraw my ETH but it's staking
| and Coinbase doesn't have an option to stop staking or move it
| in any way
| monkey_monkey wrote:
| Is the Coinbase Wallet safe to use? What would happen if Apple
| removed the app, would people lose access to funds stored in that
| wallet?
| drcode wrote:
| These types of wallets generate recovery seed phrases that are
| widely supported: When you install the wallet, you will be
| asked to write down a phrase, and you'll be able to type the
| same phrase into any of 20 other wallet implementations to
| recover your funds.
| capableweb wrote:
| Also, correct me if I'm wrong (long time ago I used iOS), but
| even if Apple removes the application from the App Store
| doesn't mean it'll be deleted from your phone automatically.
| At least I remembered that I was still able to use some apps
| even after they were deleted from the App Store some years
| ago.
| ______-_-______ wrote:
| https://nitter.net/brian_armstrong/status/152423348004071014...
|
| In other words: We only disclosed these risk factors because we
| were legally required to. Please ignore our SEC disclosure and
| half-billion dollar quarterly loss, and instead trust my
| unregulated statements posted on Twitter. There are no risk
| factors, your money is safe, the music will never stop.
| raverbashing wrote:
| > 3. We believe our Prime and Custody customers have strong
| legal protections in their terms of service that protects their
| assets, even in a black swan event like this
|
| > 4. For our retail customers, we're taking further steps to
| update our user terms such that we offer the same protections
| to those customers in a black swan event. We should have had
| these in place previously, so let me apologize for that.
|
| > 5. ...and it is possible, however unlikely, that a court
| would decide to consider customer assets as part of the company
| in bankruptcy proceeding
|
| The term people might want to google is "bail-in". And it is
| likely that Coinbase has less protections related to that than
| a conventional bank.
| duxup wrote:
| Somehow that's even less comforting....
|
| But I suppose that's the rabbit hole crypto fans go down.
| gennarro wrote:
| "There are no risk factors" doesn't inspire much confidence in
| me, even if this specific situation isn't of much concern to
| Coinbase management.
| junon wrote:
| This is not a direct quote, please don't use blockquotes. It's
| disingenuous.
| p49k wrote:
| It's a direct quote from the 2nd tweet in his thread.
| junon wrote:
| Er, no. It's not. And the GP was edited already not to use
| blockquotes, so my comment is now moot.
| oefrha wrote:
| I get the point, but please don't use a block quote when it's
| not a quote.
|
| Two problems: 1. People don't read the source. 2. People can't
| detect subtle or not-so-subtle cues.
|
| Case in point: there's already a sibling discussing "There are
| no risk factors" as if it's actually a quote from Brian
| Armstrong.
| ______-_-______ wrote:
| You make valid points. I edited my post.
| pc86 wrote:
| Ok here are some actual quotes then:
|
| "We have no risk of bankruptcy" - objectively false statement
|
| "it is possible, however unlikely, that a court would decide
| to consider customer assets as part of the company in
| bankruptcy proceedings" - goes against the entire point of
| his thread, and is also exactly why this disclosure was
| required
|
| The quote above seems like a completely accurate and fair
| characterization.
| loceng wrote:
| > "We have no risk of bankruptcy"
|
| Isn't that a statement that the SEC should fine them for?
| onionisafruit wrote:
| If he just said that, then probably. In context of the
| thread it's clear to me that he means there isn't a risk
| eminent bankruptcy.
| dj_mc_merlin wrote:
| I would argue that's the people's problem. How important is
| what they have to say anyway if they won't read the source
| and can't detect sarcasm?
|
| edit: also, even if it's not a direct quote.. c'mon, it is
| what he's saying. The SEC made a rule that applies
| _specifically for crypto companies_, saying they have to
| disclose that crypto assets under their custody could
| potentially be taken in a bankruptcy.. and this guy goes on
| to say what he was just forced to disclose is not true. It
| doesn't get more obvious.
| oefrha wrote:
| "It is what he's saying" is subjective. A quote is not (or
| shouldn't be, despite far too many violations in the real
| world). Just say "Summary: blah blah" if you want to post
| your subjective summary.
| dj_mc_merlin wrote:
| I do not believe a reasonable human would consider this
| statement:
|
| > Please ignore our SEC disclosure and half-billion
| dollar quarterly loss, and instead trust my unregulated
| statements posted on Twitter.
|
| As actually possibly coming from the mouth of the CEO of
| a company (that is not Elon).
| oefrha wrote:
| As I said,
|
| > People can't detect subtle or not-so-subtle cues.
|
| Or they just skim part of the comment and jump to reply
| immediately. Same effect.
| dhzhzjsbevs wrote:
| 300bps wrote:
| I never would have thought a CEO would make a statement
| like this:
|
| >We have no risk of bankruptcy
|
| Reality is that every company has greater than "no risk"
| of bankruptcy. That's why regulators force them to spell
| out their risks in filings.
| cinntaile wrote:
| You already write why that is mathematically impossible,
| so the logical conclusion would be that it is not meant
| to be interpreted like that no? Language is not maths, no
| risk doesn't mean the risk is zero. It means the risk is
| unlikely.
| 300bps wrote:
| These are complicated topics. The people buying crypto at
| Coinbase are not sophisticated investors.
|
| It is entirely reasonable to believe that a large
| proportion of Coinbase users would read, "We have no risk
| of bankruptcy" and choose to leave their money at
| Coinbase believing that the CEO must have used some
| financial mechanism to 100% prevent bankruptcy.
|
| Words have meaning, and when you say, "no risk of
| bankruptcy" there are a lot of people that will be duped
| into believing that literally.
| cinntaile wrote:
| It would be a bit weird to stop reading mid-Tweet though.
| After the comma he says Coinbase added a new risk factor
| to the list as required by the SEC.
| malfist wrote:
| It's not a people problem if you're making up quotes and
| people don't realize it. Use quoting for quotes. Everything
| else is in your own words, not someone elses, even if you
| are paraphrasing.
| DaveSchmindel wrote:
| Thank you for summing it up this way. It certainly sounds
| like the original author wants to be taken seriously. In
| that case they should probably respect the fact that
| there is literally a word for what they've done. Misquote
| and its synonyms do not have good connotations, and in
| their worst form are simply libel...
| maccard wrote:
| I don't have skin in the game (not a crypto fan, not in the US
| and not an investor in coinbase), but I don't think your
| sarcasm is warranted here (side note for any other readers,
| that's _not_ what his linked thread says).
|
| Regulatory capture is _real_, and dispraportionately favours
| incumbents. As regulations are tightened on crypto in general,
| firms that are not involved in the creation of said regulations
| are going to find themselves on the wrong side of the law.
| Furthermore, if _any_ organization has a reputation of taking
| sides, it's the SEC.
| gonzo41 wrote:
| The thing with crypto is its just reinventing money and all
| the same crap over. Right now it's like banking in the 1820's
| with no parachute.
|
| Crypto isn't living up to it's PR an I don't really
| understand why people can't see its flaws.
| galangalalgol wrote:
| It is probably because we don't understand finance,
| economics or their history. There is an obligatory xkcd
| somewhere but I'm too lazy to find it. Software people
| occasionally find great solutions for existing problems
| pre-tech X. As experts in tech X they tend to trivialize
| existing domain knowledge because obviously X has disrupted
| all that.
|
| Edit: I got less lazy. https://m.xkcd.com/793/
| maccard wrote:
| I never claimed otherwise, simply that a massive disclosure
| of risk is going to favour the instituitions that the
| disclosure of risk was designed for.
| duxup wrote:
| I don't think regulatory capture is the issue here. We're
| talking about a disclosure of risks ... that seems reasonable
| to me.
|
| Dude says there is no risk of bankruptcy and is predicting
| court case outcomes... and it is clearly in his financial
| interest to make the arguments he is making.
|
| The system is rigged and other truthy arguments are all but
| standard operating procedure for whatever crytpo idea someone
| comes up with. Those arguments doesn't make mean we shouldn't
| be skeptical.
| maccard wrote:
| The problem is that the disclosure of risks is written in
| such a way that captures the existing situatio nand makes
| it hard for a valid crypto firm to not post... exactly
| this.
|
| > The system is rigged and other truthy arguments are all
| but standard operating procedure for whatever crytpo idea
| someone comes up with.
|
| But remember that applies to both sides of the coin - the
| SEC disclosure of risks claiming there's a huge risk of
| monetary loss _is_ true, but it's also unavoidable as (to
| my understanding) there isn't currently a way for coinbase
| to be FDIC insured.
|
| > Those arguments doesn't make mean we shouldn't be
| skeptical.
|
| You should be incredibly skeptical, but you should be
| informed of what you're skeptical about.
| duxup wrote:
| >The problem is that the disclosure of risks is written
| in such a way that captures the existing situatio nand
| makes it hard for a valid crypto firm to not post...
| exactly this.
|
| Because ... they aren't FDIC insured nor do they provide
| any reliable protections for their user's money?
|
| It's hard not to post it, because it is true.
| maccard wrote:
| The problem is that there is no alternative statement for
| them to make. The disclosure of risks require them to be
| FDIC insured or state there is a risk of loss in
| bankruptcy, and given they don't have the option of FDIC
| insurance, they have to declare the risk. The problem is
| that coinbase don't have the choice to be insured, yet
| they get labelled as though they're yolo'ing it _whether
| they are or not_ because the FDIC don't insure the asset
| class they're trading.
| CyanDeparture wrote:
| Can anyone tell me how to set up a wallet on my Mac in order to
| get my coins off coinbase. Is there any clear guide on how to do
| that. Every link on Google seems to be spam or downloading
| potentially malicious software.
|
| It's very fustrating because so many people seem to know how to
| set up a wallet on their computer/Mac however I cannot for the
| life of me find a clear wallet to download and move my funds to
| or a guide on how to do it.
|
| If I downloaded this - https://bitcoin.org/en/download - is that
| a way to do it? I can't download this in the UK, so is it safe to
| download it via a VPN and install it that way?
|
| Thank you so much to anyone who sees this and replies.
| illegalsmile wrote:
| If you only hold bitcoin that wallet would work, another
| popular one is electrum. If you want to store multiple coins in
| one application then Exodus or Atomic would be two good
| choices. You're looking for a non-custodial wallet and as
| always, protect your keys to protect your coins, you are the
| bank at this point.
| CyanDeparture wrote:
| It's just bitcoin I'm storing, is that one I've linked to
| above a non-custodial wallet or a custodial wallet?
| bitxbitxbitcoin wrote:
| A custodial wallet. The original custodial wallet, in fact.
| lawn wrote:
| The correct term is non-custodial.
|
| A custodial wallet means someone else holds your keys,
| but a non-custodial wallet lets you hold them yourself
| (which Bitcoin Core does).
| bitxbitxbitcoin wrote:
| Thanks for that. Brain fart!
| pjbeam wrote:
| Why can't you download this in the UK? My question is sincere,
| I'm surprised to read that.
| 3np wrote:
| https://cointelegraph.com/news/bitcoin-org-blocks-access-
| to-...
|
| Craig Wright (obviously falsely) claims to be Satoshi
| Nakamoto and thereby copyright on the (MIT licensed but
| whatever apparently) Bitcoin whitepaper. A UK court ruled in
| his favor and bitcoin.org are therefore not allowed to
| distribute it in the UK. They responded with restricting
| access to both the whitepaper and the software for UK IPs.
| pjbeam wrote:
| Interesting thank you!
| jibbers wrote:
| Disclaimer: I've only done this a couple times and really am
| not good with this stuff.
|
| After you download the app you mentioned, it's going to sit and
| grind your CPU for a long time. After that, you can click on
| the 'Receive' tab. Every field here is optional, but you might
| want to fill in the label with something like "from Coinbase".
| Click "Create new receiving address" and a new window will
| appear with a QR code and some other info. Copy the address.
| Then in Coinbase, send your Bitcoin to this address.
|
| Again, this is probably a little watered down, but I hope it
| helps. Hopefully someone more knowledgeable writes up a better
| explanation.
| jungturk wrote:
| Jaxx has been in the local wallet business for a long time. Mac
| and mobile.
|
| https://jaxx.io/
| pluc wrote:
| That was the funniest thing I've read all day.
| PheonixPharts wrote:
| I'm sorry but I can't fathom why you would "invest" in a
| cryptocurrency you yourself don't even know how to use. This
| comment reads as an object lesson in exactly what is wrong with
| the current world of crypto. The entire value prop of crypto
| currency is that _you_ are in control not major financial
| institutions, but it sounds like you are very much not in
| control.
|
| I think the best strategy for someone in your case is to
| cashout from coinbase into whatever fiat currency you use
| locally and put that into your bank account.
| paulcole wrote:
| Tens (hundreds?) of millions of Americans "invest" in stocks
| they have no idea how to "use" (disclosure: I'm one of them).
| They're just numbers on a computer screen and nothing more.
|
| Should be more encouraging that this guy _wants_ to figure it
| out instead of pointing and jeering at him.
| timmytokyo wrote:
| It's not that hard for me to fathom. Cryptocurrency is a
| speculative bubble, and it has attracted a huge number of
| investors who are looking for easy ways to invest. Coinbase
| makes speculating in cryptocurrency easy. Managing your own
| wallet is not easy for the average speculator.
| chill1 wrote:
| I usually don't bother to login to comment, but I felt
| compelled in this case. The other replies include a lot of bad
| advice. You sound like you don't have much of experience
| actually using bitcoin (or cryptocurrencies). So the best (most
| secure and easiest) solution is to buy a hardware wallet and
| use the wallet app which they provide. I suggest either Trezor
| [1] or Ledger [2]. Do not buy a hardware wallet from secondary
| marketplaces or second-hand resale websites - buy direct from
| the developer's website only.
|
| [1] https://shop.trezor.io/
|
| [2] https://www.ledger.com/
|
| For added opsec:
|
| - Use a temporary email address on the order form (e.g.
| mailinator or similar).
|
| - Do not ship the goods to your home address. Pick-up your
| order in-person at a drop-off spot, post-office, or have it
| delivered to your workplace.
|
| A bit more information about hardware vs. software/app wallet:
|
| - Hardware wallets protect your bitcoin and cryptocurrencies by
| keeping your private keys secure on a dedicated USB (or air-
| gapped) device. The private keys never leave the device.
|
| - If you use an app on your phone or desktop computer, your
| private keys could be stolen by malware. This is the exact
| attack vector that hardware wallets are designed to protect
| against.
|
| Good luck!
| hnxs wrote:
| What happens if ledger goes out of business? I recall users
| being able to access their funds when Ledger had a systems
| outage some time in the past few years.
| 3np wrote:
| The users weren't unable to access their funds. However,
| Ledger Live (their desktop and mobile app) uses nodes
| hosted by Ledger, so effectively this meant that non-
| technical users who relied on their hosted nodes couldn't
| access their funds.
|
| One could (and should!) still use the same wallet with a
| self-hosted node, or a third-party one, by using the wallet
| with a different software (which is also officially
| supported; Ledger provides docs for doing so).
| chill1 wrote:
| With both Trezor and Ledger it is possible to use Electrum
| as the GUI (interface) app. So if they go out of business
| and/or stop supporting the specific hardware wallet model
| that you own, you can continue using it with Electrum.
| Alternatively, you can import the seed backup (12 or 24
| words) into a new hardware wallet.
| DebtDeflation wrote:
| If this is what's needed to securely store (not even use)
| crypto then the future for crypto is even bleaker than I
| thought.
| 3np wrote:
| This is good advice. Notably, you don't need to use the
| vendor wallet software either but can use either with e.g.
| Electrum.
|
| If you really don't want to get a dedicated hardware wallet,
| the poor-persons choice would be to (in order of preference):
|
| * In case you're really just holding and won't be wanting to
| transact with it anytime soon, a paper wallet can work.
| Generate it on an airgapped device and never let the private
| keys touch a connected device.
|
| * Use a dedicated boot environment. For example: Set up Tails
| on a USB drive and boot into it on your laptop, or make a
| fresh install on a raspberry pi or similar. Use Electrum (or
| bitcoin core qt / cli), store the wallet file only on a
| separate encrypted USB drive. Don't use this OS install for
| other things. Prefer connecting only over Tor, I2P, or cjdns.
|
| * A reputable smartphone wallet. A downside here is that you
| will have to be very diligent with your system updates and
| have to keep a peripheral eye on if the author gets acquired
| or goes rouge etc. You'd have to do your own research but
| Bluewallet seems decent.
|
| * Ignore all the advice and access the keys on your PC
| anyway. It's possible to do safely but as noted above it has
| increased risks and requires a lot of diligence.
| guessbest wrote:
| You can't download your assets. They are virtual. What you can
| do is generate an address locally and transfer your bitcoin
| funds from coinbase to that. Remember to save your secret of
| you are just throwing (virtual) money in a canyon.
|
| https://github.com/pointbiz/bitaddress.org
|
| https://bitcointalk.org/index.php?topic=43496.0
| mattwilsonn888 wrote:
| I would not recommend using wallet software on your personal
| computer. It makes it a lucrative target. Instead invest in a
| hardware wallet - either Ledger or Trezor and follow the
| instructions.
|
| Only purchase the hardware wallet directly from the company
| website, never used.
| tomcat27 wrote:
| is gemini on similar situation?
| smoldesu wrote:
| It's crazy that there are still people out there who will defend
| custodial wallets like this. Not you wallet, not your coins. It's
| as simple as that. These companies trying to take crypto
| mainstream are getting so much stuff wrong, it's no wonder
| they're losing customers and share value.
| matt321 wrote:
| If people loose tons of cash in this fiasco, it will pretty much
| kill crypto
| aaaaaaaaata wrote:
| Consider their ownership, and what it could mean for those
| parties if Coinbase were sacrificed.
|
| It's an interesting theory.
| capableweb wrote:
| If I'd get a nickel every time someone said this, I'd have tons
| of cash. But, seems that no matter how much people lose in
| cryptocurrencies, the ecosystem carries on. It might dip for a
| while, but sooner or later it comes back up. And then it
| falls... And then...
| nathias wrote:
| > That shouldn't happen.
|
| Why? I have no problem with this. The problem is just if you're
| advertising that you'r safe etc. then when you lose it isn't just
| a loss, it's a scam. Most of the centralized crypto will
| hopefully be fully replaced with defi solutions in the near
| future.
| theshrike79 wrote:
| I just moved all my crypto off Coinbase, just to be sure.
| Coinmotion seems to be a stable-ish option. At least they're not
| looking for hockeystick growth and aquisition.
| IceWreck wrote:
| Why do you use an external service ? Just keep the wallet on
| your own machine.
| imron wrote:
| As the saying goes, out of the frying pan, in to the fire.
| theshrike79 wrote:
| I'd be worried if I paid a cent of real money for any of this
| stuff.
|
| 100% of my crypto is from Keybase's XLM giveaways. I'm just
| waiting for the next stonk to sell it all and move them to
| actual markets.
| yreg wrote:
| Why not to a non-custodial wallet...?
| [deleted]
| anonu wrote:
| The government only intends to erode confidence in crypto.
| shadowgovt wrote:
| the government has no incentive to enhance confidence in
| Bitcoin when, from their point of view, money is an already-
| solved problem.
| elpakal wrote:
| Anyone want to invest whatever pennies they get on their Coinbase
| bankruptcy dollars on a new coin I just thought of? bankruptcoin
| - any coin exchange leftovers can be converted to coin and
| yolo'd.
| vmception wrote:
| Oh wow literal fear uncertainty and doubt! This is where I make
| my best trades because the information asymmetry is so high!
|
| My favorite kind of dip
| [deleted]
| qgin wrote:
| It's frustrating when someone says "oh don't worry about this
| legalese" when it suits them.
|
| When the tables are turned, they have no problem using every inch
| of that legalese against you and to protect themselves.
|
| If it doesn't matter, don't include it in the contract.
| vorpalhex wrote:
| This is the way.
|
| The contract is always binding.
|
| I always immediately treat anyone who says "don't worry about
| (something in the contract)" as somewhere between suspicious
| and hostile.
| Ecstatify wrote:
| Sensationalized title and that's from someone who doesn't even
| like crypto and thinks it's a scam.
|
| Title: {Sensationalized title}
|
| Intro: {Waffle}
|
| Middle: {Sentence that gives context to sensationalized title}
|
| Ending: {Facts & figures to legitimise article}
| paulsutter wrote:
| This is true for any brokerage account where you have margin
| enabled. Check your margin agreement carefully. Or better,
| disable margin on your brokerage account
|
| " people with margin accounts end up as just general creditors in
| any bankruptcy and recover only a fraction of their assets after
| some years in bankruptcy proceedings. During bankruptcy, their
| accounts are frozen and no transactions are allowed"
|
| https://www.bogleheads.org/forum/viewtopic.php?t=20582
|
| (sorry couldn't find a better reference searching on my phone)
| ad wrote:
| I'd be pretty interested to see how cash account is treated
| differently; I couldn't find a better reference either. But one
| advantage over the coinbase situation is at least the margin
| account falls under SIPC.
| z9znz wrote:
| > In the event the crypto exchange goes bankrupt, Coinbase says,
| its users might lose all the cryptocurrency stored in their
| accounts, too.
|
| File this under "how to guarantee your customers flee as fast as
| possible".
| krono wrote:
| When a CEO requires 8 twitter posts[1] to essentially convey the
| message "Don't worry about this legal clause", it sort of has the
| opposite effect on me.
|
| [1]:
| https://twitter.com/brian_armstrong/status/15242334800407101...
| zeroxfe wrote:
| That thread actually seemed like a reasonable response to
| balance out the "gloom and doom" from the media. Also, not sure
| why you think "8 twitter posts" are a such big deal -- tweets
| are limited in size, and twitter has a broad audience, and
| these types of tweet threads are very common.
| nolok wrote:
| Because if all he had to say was "there is no actual risk",
| then that's all he would have written, and it fits in less
| than a single tweet.
| nisegami wrote:
| Why would anyone just take that as it is?
| nolok wrote:
| Because he is the CEO and if he lies about those matters
| in a public communication he is liable to shareholders.
| Which is why he doesn't do it.
| paxys wrote:
| If it was a reasonable explanation then it would be in the
| SEC disclosure. Except that you can get sued for
| misrepresenting what's in there. On the other hand you are
| mostly free to Tweet whatever garbage you want.
| dj_mc_merlin wrote:
| It does not look reasonable in any way to me.
|
| > Your funds are safe at Coinbase, just as they've always
| been.
|
| You won't lose your funds, don't worry.
|
| > For our retail customers, we're taking further steps to
| update our user terms such that we offer the same protections
| to those customers in a black swan event. We should have had
| these in place previously, so let me apologize for that.
|
| Unless we have your keys, in which case I'm sorry we're not
| protecting you yet (but don't worry, everything's fine).
|
| > We have no risk of bankruptcy
|
| Said directly after their worst quarter to date. Always a lie
| regardless.
|
| > however we included a new risk factor based on an SEC
| requirement called SAB 121, which is a newly required
| disclosure for public companies that hold crypto assets for
| third parties.
|
| A rule made specifically for their type of companies that
| clarifies risks of storing assets in a non regulated bank..
| somehow shouldn't make you scared that your assets might get
| taken away since it's very "unlikely".
| TheCondor wrote:
| They are common and stupid.
|
| Write a memo, have the lawyers review it, post it on
| Coinbase.com, tweet a link, do a press release, etc.
| Redoubts wrote:
| or you go to where the people are, and talk in the way
| that's expected there.
| krono wrote:
| Only took me 5 words and a contraction to say the same thing,
| and I'm not even a native English speaker.
|
| Edit: All those maybe's and probably's are the most
| troublesome part though.
| bombcar wrote:
| "Pay no attention to the man behind the curtain" would have
| worked just as well.
|
| Before reading that tweet chain I was on the "SEC always
| requires horribly pessimistic outlooks" and now I'm in the
| "they're going bankrupt very soon" camp.
| UncleMeat wrote:
| I dunno, these headlines are always a bit silly. "Snapchat's
| IPO filing says that they might never turn a profit ever!"
| Yeah, the risks section of an IPO filing are dry and always
| filled with this stuff. They aren't some secret code the
| company is sending out. I see this as the same.
| walderf wrote:
| i don't _use_ twitter that much so i don 't know if this type
| of multi-tweet message is common place on the platform or not.
| especially for conveying important information in any sort of
| manner that should be taken seriously.
|
| i recently experienced a ~20 tweet "story" that was explaining
| a pretty serious and important shift in the posting parties
| operations. it was the first time i recall ever having
| encountered this sort of "tweet" and, at least to me, it did
| not seem like an ideal or effective means of communication.
|
| i get that they want to reach their audience and that's what i
| feel like twitter is good, well, probably the best at. the
| whole intent of the platform had always been geared toward
| sending short, articulate messages. a substance-filled,
| important message like this one and the one i had to read
| before no doubt took a few "practice runs in the mirror", so to
| speak. i read both of these messages from the comfort of my
| desktop PC using nitter. as difficult as that was, i can't
| imagine having view it using a phone.
|
| regardless of the topic of the message, my thoughts are, if you
| have something to say, say it in a single tweet with a link to
| an officially hosted post or webpage. any more than that,
| especially on any sort of usual basis, is not only inconvenient
| for both parties involved, but confusing, unprofessional, and,
| in a lot of cases, like you said, quite off-putting.
| robinjhuang wrote:
| This might have been mentioned already, but the more accurate
| comparison would be to stock brokers. Robinhood has SIPC
| insurance up to $500k in case they go bankrupt.
|
| Crypto has no such insurance.
| skizm wrote:
| I feel like saying "We have no risk of bankruptcy" is the same as
| Musk saying "Funding secured" on Twitter. The statement is
| provably false and will directly impact stock price.
| bogwog wrote:
| If I had any cryptocurrencies in Coinbase, I'd be transferring
| it out ASAP after reading this and the CEO's response on
| Twitter trying to downplay the risk. That's a red flag.
| ar_lan wrote:
| Coinbase has locked a lot of people's ETH2 funds - there is
| no way to currently withdraw them. This was always a strange
| concept to me, but there are a good chunk of customer's who
| are literally just stuck with Coinbase, like it or not, with
| their funds being held hostage.
|
| I know it's a choice, but it's also been like that for many,
| many months at this point, when I can imagine most people
| thought "this would only be this way for a few days/weeks".
| gitfan86 wrote:
| How are you going to prove that there is a risk of bankruptcy
| today if the company doesn't go bankrupt today?
|
| How are you going to prove that the phone calls and meeting
| with the Saudis didn't include funding commitments from the
| Saudis?
|
| I'm not suggesting that these CEOs are 100% honest at all
| times, I'm sure they are not, but you need actual proof for
| fraud to have bet committed.
| adam_arthur wrote:
| Well, it's objectively true that any company can go bankrupt.
|
| And an easy scenario to picture for Coinbase would be if
| crypto assets all dropped 90% or more in value in a short
| span of time, and went the way of the beanie baby. Is it a
| high probability? No, but at least a few percent chance.
| tu7001 wrote:
| I don't understand why Coinbase have troubles, Crypto has arisen
| a lot, so the should have great interests.
| floatinglotus wrote:
| It will amusing if people who bark all day about decentralized
| currencies lose a bunch of money because they still wanted the
| benefits of a centralized bank to hold their magic coin purses.
| mrjin wrote:
| Wasn't the exchange that stole the user funds?
| [deleted]
| _nhynes wrote:
| Now the real question is whether bankruptcy would topple USDC
| since Coinbase is one of the major backers [0]. It's holding
| steady right now, but so was UST a few days ago. USDC has $48B
| supply and is propping up DeFi apps on many other networks (just
| look at AAVE [1] and Curve [2], two multi-chain protocols), so if
| it falters, there could be massive fallout.
|
| [0]: https://www.centre.io/usdc
|
| [1]: https://app.aave.com/markets/?marketName=proto_mainnet
|
| [2]: https://curve.fi/pools (search USDC)
| capableweb wrote:
| I don't think you can really compare UST and USDC like that.
| USDC has major backing by very large players in the space while
| UST is backed by... just Terra?
|
| But I agree on the last part, if USDC looses its peg, large
| parts of the ecosystem will be fucked. But considering who is
| managing + supporting USDC, it'll take a large event for USDC
| to lose its peg.
| [deleted]
| FYYFFF wrote:
| I have been trying, unsuccessfully for 2 years to validate my
| account on Coinbase. I have over 100k in ETH stored in their
| wallet, have the highest levels of access to their services but
| CANNOT trade because they have NO HUMANS available. Their systems
| DO NOT work and there is NO contact info nor any way to actually
| reach a person.
|
| So I have been trading with others and will never use CB for
| anything but cold storage. (Which they're great at)...
|
| The company is the worst I have ever dealt with. There is no way
| to interact with a person. So if something does happen, you have
| NO RECOURSE.
|
| Based on my experience, they will be bankrupt. This is a
| certainty. You cannot have a financial entity that has ZERO human
| interaction or service. No trust, none at all...
| uncomputation wrote:
| Why do you say Coinbase is good for cold storage? It's not
| custodied so in the event they went bankrupt/sanctions
| compliance/TOS violation, they could lock you out forever. A
| hardware wallet is good for cold storage. Coinbase is a hot
| wallet.
| [deleted]
| sammy2244 wrote:
| vorpalhex wrote:
| It is probably worth reaching out to a lawyer and starting a
| legal suit. A legal subpeona tends to get humans involved real
| quick.
| dehrmann wrote:
| For $100k, this is absolutely worth it.
| rogual wrote:
| I've been in that situation before with Coinbase, getting
| ignored and slow-rolled by their know-nothing support team. I
| submitted a complaint to the CFPB, not expecting much as I'm
| not in the US, and shortly afterwards Coinbase started replying
| to me properly. I eventually got my account back. Maybe worth a
| go.
| Barrera wrote:
| Also read the fine print about the "insurance" Coinbase carries
| against loss of bitcoin through an attack. It's limited to the
| hot wallet only. Cold storage is not insured.
|
| In other words, the insurance is probably worthless. People with
| the good sense to realize that Coinbase is not a bank in any
| sense of the word are unlikely to be affected.
| lamontcg wrote:
| Coinbase popping and everyone with their funds/crypto still there
| gets ruined is probably in my top 5 signs that the crypto
| apocalypse is nigh and the Ponzi ends.
|
| I still expect that the current downturn reverses later this
| year, and Coinbase isn't popping yet they're just having to
| disclose that risk. But given a real melt down in the broader
| economy and something like commercial mortgage backed securities
| popping, I expect that Coinbase would melt down.
|
| Even though I'm not as negative as everyone else over current
| conditions, it is probably time to seek shelter (or that if there
| is a bounce later this year it is probably a profit taking
| opportunity before the crash)
| Animats wrote:
| Yes.
|
| _Do not keep funds in "hosted wallets" for more than a day or
| two._
|
| Of course, Coinbase wants you to keep your money with them, so
| they can dip into your funds. Do they offer a service where funds
| in your Coinbase account sweep daily into a non-hosted wallet of
| your choice? No? How about that.
| tfang17 wrote:
| This is standard verbiage in financial docs of this sort
| vmception wrote:
| Good dips to buy, I rarely see literal FUD by the definition of
| the acronym. Some crypto is being firesold, COIN stock is being
| firesold
|
| Is it the bottom idk
| usrn wrote:
| I've been messing with crypto long enough to know how this goes
| and my coins are already in a local wallet.
|
| Coinbase had a good run but don't be stupid. Crypto exchanges
| aren't insured like consumer checking accounts are in the US and
| when they're gone they're _gone._ Geth isn 't hard to set up for
| most of us, it took me about 20 minutes to have it up and running
| after not using a local wallet for nearly a decade.
|
| Remember to write down your password (I can't emphasize that
| enough. I'd be retired by now if I had done that with the wallet
| I made in 2011) and back up your wallet. I keep mine in git.
| vmception wrote:
| Geth lol. The worst full/fast synced node software out there?
| Thats what you choose to write?
|
| Just let the people use metamask, more full nodes are nice but
| theyre not there yet
| usrn wrote:
| Meh, I'm using it in lite mode. It works fine that way. I'll
| probably set up a full node at some point.
| vmception wrote:
| yeah lite/pruned/fast mode is a good way to get your feet
| wet, "using your own node" is just _so far_ removed from
| "use an unhosted wallet outside of exchanges"
| alex_suzuki wrote:
| Why on earth would the typical customer that is scared by this
| announcement choose to run a node instead of just withdrawing
| to Metamask or a hardware wallet?
| usrn wrote:
| Metamask looks like a smartphone app. I don't have a
| smartphone and keeping crypto on one seems like a bad idea.
| halukakin wrote:
| When you buy BTC using coinbase do you really have a wallet
| somewhere, do you really buy BTC? Or does coinbase allocate BTC
| to you from its own BTC holdings?
| robjan wrote:
| The latter. The Coinbase fees would have to be a lot higher
| (and variable) if there was one wallet per customer.
| bitxbitxbitcoin wrote:
| Definitely the latter and the amount of people that don't
| understand this is disturbing.
| pbmango wrote:
| This conversation is especially interesting given the FDIC is
| probably the most decentralized component of traditional
| financial infrastructure.
|
| It has cost taxpayers effectively nothing and rests on mutual
| insurance across the system. Yes there is a line of credit to the
| Treasury but the overall security it has provided for 70 years is
| probably hard to measure compared to the Fed buying/selling
| activity. I know there are probably teams working on this for
| crypto already (without the law mandate).
| runjake wrote:
| You should move your crypto out of Coinbase or any other
| exchange's wallet into your own cold wallet.
|
| In Coinbase's case, you can move that crypto to any wallet,
| including Coinbase's Coinbase Wallet app, where you have
| possession of the private key and should still have access to
| those funds if CB were to go south.
|
| But yeah, welcome to the world of currency not backed by guns, so
| to speak.
| skilled wrote:
| Wait, can someone explain to me why they would explicitly
| announce it like this? This almost sounds like they're expecting
| to go bankrupt, or have plans to close the platform.
|
| In the last 7 days they have lost over 50% value, and dropping a
| news bomb like this is only going to make it worse, isn't it?
| ergonaught wrote:
| I'm sure someone could. To quote, "In comments shared on
| Twitter, Coinbase CEO and founder Brian Armstrong said the
| exchange had "no risk of bankruptcy," and that the disclosure
| was made due to new rules set by the U.S. Securities and
| Exchange Commission regarding public companies that hold crypto
| assets on behalf of others."
| onlyrealcuzzo wrote:
| Is something amiss with USDC?
|
| If it's even partially backed by other cryptos, it could
| implode pretty soon.
| legutierr wrote:
| It's fully backed by cash held at US banks and by US
| Treasuries, per my understanding. And this disclosure did not
| pertain to those reserves, which are held in trust on behalf
| of customers as per state money-transmitter laws, which
| customers would presumably not be treated as unsecured
| creditors, but only to cryptocurrencies held in Coinbase-
| controlled wallets.
| luciusdomitius wrote:
| 3 months ago J Powell (of Kraken, not Fed lol) adviced his
| users not to keep their crypto on his exchange[0]. Not the best
| business move either. A possible explanation might be provided
| here: https://twitter.com/jespow/status/1498112744754606081
|
| 0.
| https://twitter.com/jespow/status/1494462097161220104?lang=e...
| next_xibalba wrote:
| This is a formal filing with the SEC [1]. Companies are either
| incentivized or outright mandated to disclose every possible
| risk, even those which are highly improbable. In this case, due
| to new regulations that directly affect Coinbase, customers'
| claims in a Coinbase bankruptcy are clarified. Also, some
| implications for the accounting thereof. Coinbase is not a
| bank, and assets of customers are not insured. Thus, customers
| would probably not be made whole in the event of a bankruptcy.
| Coinbase says it is possible that these facts could harm
| business if current or potential customers find this risk
| sufficient to reduce, halt, or not start doing business with
| Coinbase.
|
| The filing says nothing about how probable a bankruptcy is, but
| Brian Armstrong, Coinbase CEO, has given his perspective on
| this topic here: [2] Here is the lede: "We have no risk of
| bankruptcy."
|
| [1]
| https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...
|
| [2]
| https://twitter.com/brian_armstrong/status/15242334800407101...
| matwood wrote:
| Read any company annual report and you'll see all sorts of
| risks listed. Amazon lists war and other geopolitical events
| for example. This isn't to minimize that bankruptcy is a risk,
| just that it doesn't mean it is imminent.
| kristopolous wrote:
| They're extremely fun to read sometimes bordering of fantasy
| and fiction. I don't think I've seen one mentioning the
| undead crawling their way to the surface from their earthen
| tombs but I probably just haven't read enough
|
| Rest assured if I ever go public I'll insist on putting a few
| in there. A battalion of armored octopi marching ashore with
| undefeatable sea ordnances enslaving humanity by tentacle
| could prevent us from hitting our quarterly numbers...
|
| I've put so many hidden jokes like that in terms of service
| and privacy policies over the years.
| kasey_junk wrote:
| They are required to do so by the SEC.
| Taylor_OD wrote:
| So best practice is to continue to hold your coin in a personal
| wallet and move to an exchance like coinbase when you need to
| sell?
| paulpauper wrote:
| They will make you do tons of ID verification to sell, take
| forever.
| corydori wrote:
| Coinbase is such a shit company...My interactions with them have
| been absolutely awful. The ended up trying to use a AMEX gift
| card attached to my papal to buy some crypto, got no error but
| the funds never went through. Apparently they didn't like that
| transaction and was flagged as fraud. I was told I can't open a
| support ticket or have it reviewed for 2 months, "they can't
| disclose the reasoning behind this." So I had to dump everything
| I had built up in that account into USD and withdraw it.
| vmception wrote:
| > So I had to dump everything I had built up in that account
| into USD and withdraw it.
|
| Had to?
|
| You had the option of withdrawing it all to unhosted wallets on
| the respective networks.
| tim333 wrote:
| >in the event it ever declared bankruptcy, "the crypto assets we
| hold in custody on behalf of our customers could be subject to
| bankruptcy proceedings." Coinbase users would become "general
| unsecured creditors,"
|
| That's terrible. Coinbase act very much like stockbrokers but
| with crypto instead of stocks and should segregate client funds
| the same way. If you deposit a 1000 Apple shares say with eTrade
| and they go bust the Apple shares are still yours and can't be
| taken to pay eTrades debts - that's how it should be. Otherwise
| it's just asking for the brokers to legally steal your
| investments by paying themselves huge bonuses and then saying
| oops, we're broke.
| joeblow21 wrote:
| chollida1 wrote:
| Those of us who were around in 2008 remember when Lehman went
| bankrupt.
|
| In that case they were the custodian for hedge funds assets.
| Lehman held those assets, in some cases because the British
| government force them to.
|
| This really caused 2008 to spiral as now hedge funds that were
| perfectly fine got locked up and had to pull assets from the
| market due to Lehman holding their assets which caused even more
| selling and the feed back loop continued as funds sold their best
| assets first(think the Microsofts of stock world).
|
| A coin bankruptcy would be the same thing, retail probably
| doesn't matter too much but if COIN held institutional funds,
| those guys do need to have liquidity for redemptions. This would
| mean alto of sell pressure on other exchanges and would lead to
| the best and highest quality crypto assets getting hammered down
| as funds fled to cash/stable coins.
|
| Solana would probably crash and then shut down the network, even
| though they still try to claim they are a decentralized network:)
|
| ETH and BTC would see very sharp drops in the first few days and
| then bounce back as people need to put money somewhere.
|
| DEFI would feel this sell pressure and have alot of failings due
| to liquidity pools bein drained in this rush to quality. At best
| they'd get shutdown, at worst they'd just fail and go away.
|
| You'd also expect the algo based stable coins to break the peg,
| even the well collateralized DAI would probably break.
|
| Tether would probably continue on just fine as that's probably
| what most institutional funds would go to and I've given up on
| trying to predict its demise,
| etimberg wrote:
| I wonder if this will cause them to go bankrupt because users get
| scared and leave. Just like Bear Stearns in 2008
| capableweb wrote:
| I don't think Coinbase can go bankrupt because users leave the
| platform. They would go bankrupt because of mismanaged funds in
| that case. Let's say all users withdraw their fiat currencies
| and also cryptocurrencies, Coinbase will still have money in
| their own bank for sure, unless they store their own money on
| their platform, which is highly unlikely.
|
| Even if 100% users withdraw 100% of their funds, Coinbase takes
| a transfer fee from all of those withdrawals, so they'll get
| even more money in their account in that case.
| cyberlurker wrote:
| They don't have 100% of the funds on hand, same as most real
| banks.
| 0daystock wrote:
| FDIC doesn't even have enough funds to cover 1.3% of all
| deposits. Consider that before assuming your investments are
| protected.
| vorpalhex wrote:
| FDIC has the weight and backing of a very large government who
| is capable of creating more fiat currency as needed.
| 0daystock wrote:
| > creating more fiat currency as needed
|
| Ironically, this very thing led to FDIC failing to meet their
| obligation deposit amount of 1.35%.
| paulpauper wrote:
| lol I guess the Superbowl ad was not so smart and a harbinger of
| things to come. For 2023 I guess we can look forward to no more
| crypto ads.
| ar_lan wrote:
| 2025 will probably be another boom, though.
| paulpauper wrote:
| i dont think so
| sizzle wrote:
| Bright red flag that screams "not your keys not your coins"
|
| Pull out all your funds into your own wallet
| Taylor_OD wrote:
| To clarify, this means just the crypto stored on their website
| but not in their wallet?
| zendaven wrote:
| Correct, the assets you have in a wallet (something you have a
| secret phrase for) are not controlled by Coinbase.
| dasz wrote:
| If your crypto isn't actually in your own wallet you are really
| just someone's creditor.
|
| The whole point of crypto wallets is that you don't need such
| central businesses to hold your cash.
|
| Then again there's all sorts of benefits so there's a tradeoff.
| daniel-cussen wrote:
| Oh so they're doing the goldsmith does when he realizes he always
| had a baseline amount of gold in the vault no matter to whom it
| belonged?
| mathieubordere wrote:
| Maybe today is the day this charade comes to an end.
|
| edit: Premarket Coinbase value drops -26.70% now
| stjohnswarts wrote:
| So why don't people also keep their wallet keys somewhere in
| their homes as well? That's all you need to access your funds,
| coinbase is just a convenience. To do otherwise seems insane
| especially if you have more than $1000 in there.
| alex_suzuki wrote:
| Not your keys, not your coins - indeed!
| tomrod wrote:
| I put $200 into a coinbase account (my second go at crypto) at
| the first "peak" of bitcoin, more or less to teach myself to not
| invest in hype and to monitor the hype cycle over time.
|
| It's been very interesting to follow this over the recent peak.
| Coinbase probably doesn't settle each transaction immediately,
| since Bitcoin and several other cryptocoin transactions per
| second are still low, instead using internal accounting to
| satisfy the counterparty transaction.
|
| Fun times. Good luck to Coinbase, they may have just triggered a
| run!
| jo6gwb wrote:
| Here's a great analysis for why Coinbase and other exchanges with
| similar legal structures pose a risk to customers should the
| exchange ever declare bankruptcy.
|
| https://www.creditslips.org/creditslips/2022/02/what-happens...
|
| TLDR: In bankruptcy, it is likely to be treated as a debtor-
| creditor relationship, not a custodial (bailment) relationship.
| ck2 wrote:
| Brings back really bad memories of Crypty, lost so much to their
| stupidity and then missed out on the settlement.
| talhof8 wrote:
| So much for 'read + write + own'
| aaaaaaaaata wrote:
| Coinbase barely has an "us too" web3 wallet -- they're not a
| proper web3 company, they're a tradfi bank in sheep's clothing.
| la_fayette wrote:
| What is the point in using coinbase anyway? It is just an
| expensive place to buy crypo assets, I don't get the value
| proposition, since you have so many cheaper and simpler places to
| buy crypto...
| mdoms wrote:
| Wait if Coinbase users don't control their own wallets then how
| do they spend their bitcoins?
| [deleted]
| nunez wrote:
| mtgox redux
| jermaustin1 wrote:
| I'm still unhappy with this. I had ~5 BTC with them, but have
| never been able to give sufficient evidence for settlement, and
| they keep taunting me with monthly settlement emails.
| ffsgsgdfsfsf wrote:
| marban wrote:
| Shareholder letter that ends with #wagmi. GTFOH
| civilized wrote:
| Remind me what is the point of holding cryptocurrency again?
| mattwilsonn888 wrote:
| Having a Coinbase account with funds on it is not holding
| crypto-currency. Everyone who knows anything has been saying
| since before Coinbase was around "not your keys, not your
| coins." If you use an uninsured bank as your vector for
| understanding the benefits of cryptocurrency you're bound to
| stay confused and continue making non-arguments dependent on
| poor price performance of the asset you irrationally despise
| because despite your technical background you still missed out
| on it.
| yreg wrote:
| A. speculation
|
| B. diversification against more tradional assets
|
| C. store of value if you don't have access to any better
| financial instruments
|
| D. keeping some ready on hand to pay off ransomware attacks
| AlexandrB wrote:
| Regarding B, Is there any evidence that BTC is
| countercyclical? It seems to have followed the conventional
| market down over the past week.
| vmception wrote:
| > It seems to have followed the conventional market down
| over the past week.
|
| Bitcoin would be $3 per Bitcoin if it _only_ correlated to
| the NASDAQ over the last 10 years
|
| It does its thing
| yreg wrote:
| Well it of course doesn't corellate S&P 500 1:1, so it
| provides _some_ diversification (same as everything else).
|
| Gold has been down over the past week as well, it is normal
| for all instruments to move together at times of
| uncertainty (and when many folks are getting margin
| called).
| brink wrote:
| E. Learning what it's like to be dumped on
| lexapro wrote:
| So far it worked out pretty well
| civilized wrote:
| All except maybe D also apply to Pokemon cards
| yreg wrote:
| Yes, so what?
| lexapro wrote:
| And to stocks, real estate, gold, ...
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