Coinbase, America's largest cryptocurrency exchange, holds around $256 billion in cryptocurrencies and traditional currencies—and it alarmed some users this week when it warned that those holdings could be lost if the company files for bankruptcy. The company said "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," Business Insider reports. CEO Brian Armstrong later said there was "no risk of bankruptcy," but new SEC rules required Coinbase to disclose the risk to customers, reports Bloomberg.
"We should have updated our retail terms sooner, and we didn’t communicate proactively when this risk disclosure was added," Armstrong said. "My deepest apologies." Coinbase has lost more than half its value this week amid a slump in cryptocurrencies, the AP reports. The company's stock fell 43% in the four days leading up to an earnings report Tuesday, and another 26% Wednesday after it disclosed a $430 million net loss in the first quarter of this year. The company's stock, which hit $429 a share after its IPO 13 months ago, closed at $53.72 Wednesday.
Cryptocurrencies have been hit hard this week by investors' retreat from riskier assets and by issues with TerraUSD, a "stablecoin" formerly pegged to the US dollar, Wall Street Journal reports. TerraUSD, formerly the third largest stablecoin, was de-pegged and sank as low as 26 cents after a series of large withdrawals, and Luna, a "sister token" intended to stabilize TerraUSD, plunged by more than 99% Wednesday, per the Journal. Bitcoin, the largest cryptocurrency, briefly dropped below $26,000 early Thursday, its lowest level since 2020. Treasury Secretary Janet Yellen told the Senate Banking Committee Tuesday that it's time for a "consistent federal framework" to regulate stablecoins. (More cryptocurrency stories.)
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