One of the cryptocurrency’s biggest exchanges, Coinbase, decided to help protect customers who have stored money with Prime Trust, a crypto custodian facing bankruptcy. The financial troubles prompted Prime Trust to recently file for Chapter 11 bankruptcy protection. In such circumstances, Coinbase filed an amicus brief supporting the customers’ right to their funds.
What Coinbase is arguing is that the customers’ assets that Prime Trust is in possession of should not be considered part of the bankruptcy estate of the company. The customers still own these funds, as per both the Coinbase and Prime Trust user agreements, according to Coinbase. The law said that the Uniform Commercial Code (UCC) Article 8 should have been enforced by the court to protect the customer assets held by custodians such as Prime Trust.
However, this legal fight is important to not only the crypto world but to traditional finance as well, because the UCC Article 8 is used widely to protect customers’ monies in many industries. While the case is larger than crypto, Coinbase Chief Legal Officer Paul Grewal said that the law should protect customer assets in any financial sector, digital or traditional.
Coinbase’s involvement in this bankruptcy case indicates that they will protect user funds and set a strong legal precedent for the future cases in both the crypto and traditional finance worlds without a doubt.
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