Crypto exchange Coinbase filed their quarterly earnings statement yesterday, reporting a revenue of $1.17bn, down 27% year-on-year and 54% versus the last quarter of 2021. According to the filing, in the first quarter of 2022 Coinbase suffered a net loss of $430m.
Besides the revenue, Coinbase reported downward trends in most major key business metrics, including monthly transacting users and assets accumulated on the platform, compared with data from December 2021. Conversely, verified users on Coinbase rose over the last three months by 9 million.
The filing was enough to disquiet Coinbase users, with Coinbase tokenized stock COIN dropping 25% after the announcement. The plunge is not wholly unrelated to the wider crash of the crypto market, which saw Bitcoin fall to June 2021 levels, and the still-unfolding Terra cataclysm, but COIN had fared relatively well before the report appeared despite earlier trouble related to an insider trading accusation.
Custodial and unsecured
Coinbase’s 10-Q form also includes a provision that in the event of a bankruptcy, custodially held crypto assets could be considered as property of Coinbase’s estate, thus falling under bankruptcy proceedings, effectively making customers unsecured creditors.
The provision, shared by Sophia Zaller of the crypto insurance company Relm, added to the flames, making Coinbase users question the security of the assets they store on Coinbase and triggering a heated debate about the safety of assets across centralized crypto exchanges.
In response to Zaller’s tweet, Coinbase CEO Brian Armstrong attempted to defuse the tension by saying that Coinbase has “no risk of bankruptcy.” Armstrong apologized for the lack of clarity and conceded that if Coinbase were to face bankruptcy proceedings, a court could, in theory, seize customers' assets.
Armstrong went on to confirm Coinbase was working on bolstering customer protections against “black swan events,” meaning an unprecedented and unexpected calamity.