What would happen to cryptocurrencies if Coinbase goes bankrupt?

 

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Jan Meriss Alfonso
Assistant at Ascent Law LLC

What Happens to Cryptocurrencies If Coinbase Goes Bankrupt?

Bitcoin

Coinbase is a major cryptocurrency exchange, and it holds as much as $256 billion in customer funds and assets. The company is not bankrupt, but it lacks the protections of a bank, which means that if the exchange goes down, customers would be out of luck. If the company goes under, it is likely that the exchange's assets would be used to pay off debts, and customers would have to claim their money back.

Ethereum

The decentralized global computing platform Ethereum supports peer-to-peer applications and smart contract transactions. "Ether" is the native crypto asset of the Ethereum network. A fork occurs when the main chain is split into two separate blockchains, creating a new crypto asset. A crypto asset is held in a "hodl," or "hodl wallet," by a member of the crypto community. Another type of wallet is called a "hot wallet." This is a wallet that is constantly connected to the internet and can broadcast transactions.

Litecoin

If Coinbase goes bankrupt, Litecoin users would be treated as general unsecured creditors, meaning they would be barred from accessing their funds on the platform. In a bankruptcy, companies liquidate their assets and distribute them among creditors. The first to receive assets are secured creditors, followed by unsecured creditors. General unsecured creditors are behind secured creditors, but ahead of common stockholders.

Stellar Lumens

Stellar Lumens is the native cryptocurrency of Stellar, a blockchain-based payment network. The founders of Stellar see the network as a way to make payments faster and cheaper around the world. These companies are competing with Western Union and MoneyGram, both of which charge high fees and take days to process transactions. In addition, the Stellar network performs transactions with speed and security.

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