Zerodha CEO Nithin Kamath has a warning about Coinbase

    Nithin Kamath, the co-founder of Erodha, has issued a warning to Indian cryptocurrency investors after the new risk factor of Coinbase disclosure sparked fear among all crypto stakeholders.

    “Coinbase’s recent filing: Customer assets could be in danger in the event of bankruptcy,” Kamath tweeted on May 11, adding that Indian crypto exchange investors should be aware of the risk as well.

    “Unlike the stock market, where stocks are housed in a Demat account with a depository and there is no broker risk,” he explained.

    What is Coinbase?

    Coinbase is a popular cryptocurrency exchange that makes buying, selling, and exchanging cryptocurrencies simple. They make purchasing Bitcoin as simple as purchasing stock through an online stockbroker, but beware of the high fees and bad customer service.

    Nithin Kamath and Brian Armstrong’s views on Coinbase

     In a recent filing, Coinbase stated that, in the case of bankruptcy, crypto assets held by the exchange might be considered bankruptcy property, with clients classed as unsecured creditors. In any bankruptcy, an unsecured creditor would be the last to be paid and the last in line for claims.

    Coinbase CEO Brian Armstrong stressed that the declaration was done to meet a regulatory requirement and did not signal that the largest US bitcoin exchange was facing insolvency.

    After the news broke, Armstrong remarked on Twitter, “We have no risk of bankruptcy.” Although it was possible, he added it was doubtful that “a court would decide to regard consumer assets as part of the corporation in bankruptcy proceedings.”

    Brian Armstrong stated that Coinbase would take additional precautions to ensure that its retail clients were protected.

    “We could have updated our retail terms sooner, and when this risk disclosure was included, we didn’t communicate proactively,” he said. “I really apologize.” Coinbase has lost half of its value in the last week, including its worst one-day decline ever on Wednesday, as the notoriously volatile cryptocurrency market experienced yet another downturn. With dwindling sales and active users, Coinbase announced a $430 million net loss in the first quarter or $1.98 per share.

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