People are really surprised by this? You should definitely assume that crypto exchanges and other crypto intermediaries of all stripes do not hold your crypto in a bankruptcy-remote structure.
Not solely your keys, not your coins... After Mt. Gox it should be clear to anyone that unless you hold your own coins on your own you don't really guarantee them.
> As of March 31, 2022, we held $256 billion in custodial fiat currencies and cryptocurrencies on behalf of customers. Supported crypto assets
are not insured or guaranteed by any government or government agency. We have also entered into partnerships with third parties, such as with
the Centre Consortium, as a reseller of USDC, where we or our partners receive and hold funds for the benefit of our customers.
...
> Any failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in
compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant
financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines
and additional restrictions, which could adversely impact our business, operating results, and financial condition. Moreover, 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.
This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base,
discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating
results, and financial condition.
I truly don't understand why people are so upset about this. If you're claiming bankruptcy but sitting on a fat crypto wallet, why should it not be subject? Your bank isn't going to hide assets for you, why would any other legitimate business?
This isn't about an individual declaring bankruptcy. It's about Coinbase declaring bankruptcy, and users' wallets being used to pay Coinbase's debts. That's why people are upset.
Yes, but it's not as weird as it sounds. It says the users are creditors as well so using the users' accounts to pay the users is not particularly strange.
Sure, why would anyone invest in them if they weren’t sure they’d get paid out first when things go bad?
Kind of like the banks back in ‘09 making their depositors take a haircut to ensure the bank didn’t go under. Nobody really complained because it was the offshore banks where oligarchs and such hide their money and they received ‘ownership’ in return for them stealing their deposits.
But the average American, or even pretty financially sophisticated ones, don't have experience with an institution like that.
I think it's fair to expect users to know the coins they buy might lose value, but this is a bizarre and unexpected risk. It's clear from this thread that hardly anyone thought to consider this risk because they are trading off the expectations created by other, better regulated institutions (namely domestic banks).
Edit: I may have misread your intentions, when I wrote this I thought you were saying this arrangement was OK because it has happened elsewhere.
It's weird because this is violating a fundamental principle that people generally associate with crypto: if you know the keys, you own the crypto. At least this is the case for Bitcoin.
https://news.ycombinator.com/item?id=30229324
> Custodially Held Crypto Currency Is Likely Property of the Bankruptcy Estate