Cryptocurrency exchange Coinbase has made a significant legal move in the Prime Trust bankruptcy case by filing an amicus brief to support the protection of client assets.
Legal Implications of the Brief
Coinbase's Chief Legal Officer, Paul Grewal, stated that under Article 8 of the Uniform Commercial Code (UCC), assets held in custody should remain the property of customers and not become part of the bankruptcy estate. This stance, Coinbase asserts, is vital not just for the cryptocurrency sector but also for all industries that involve custodial arrangements, such as traditional and digital finance industries. Grewal noted that both Coinbase's and Prime Trust's user agreements clearly state that assets under custody belong to the customers.
Reinforcing Trust in Financial Markets
The amicus brief further addresses Coinbase's policy on maintaining customer assets, which it views as a critical business requirement. Coinbase emphasized that Article 8 is essential for protecting market integrity and fostering trust in financial systems. According to the company, ensuring that customers can trust their assets are protected from creditors even in bankruptcy scenarios is crucial for stable financial transactions.
Call for Regulatory Clarity
Coinbase has also written a letter to U.S. banking regulators, including the OCC, Federal Reserve, and FDIC, urging them to clarify the guidance on banks providing cryptocurrency services. The letter advocates for the removal of 'unlawful and unwarranted' barriers regarding crypto-custody services.
Coinbase's action in the Prime Trust bankruptcy case could set a precedent for protecting client assets in bankruptcy scenarios, both in the crypto and traditional financial sectors.
