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Image credits: Coinbase

Last month, cryptocurrency exchange Coinbase disclosed its first net loss of $430M in its Q1 2022 report. As per the report, Coinbase revealed that its revenue dropped 27 per cent to $1.17B, down from $1.6B in Q1 2021. 

Owing to the poor Q1 performance, the price of Coinbase’s junk bonds also tanked, giving rise to the fear of the company going bankrupt. This led to concern among people who hold crypto assets on Coinbase.

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To allay these fears, Coinbase’s Chief Legal Officer Paul Grewal clarified the situation in a blog post. He started off the blog by assuring customers that their funds are safe within the exchange. 

“Even though customer assets have always been protected, we know this was scary — especially in a down market,” says Grewal.

According to Grewal, Coinbase protects customers’ funds both legally and physically. He also noted that the exchange has updated its Retail User Agreement to extend bankruptcy protections of institutional clients to retail investors.

“We believe that digital assets in our custody have always been Article 8 financial assets, but have clarified this so that there will not be any doubt,” he says. 

Grewal also said that the firm does not lend or take any action, including lending and trading, with its customers’ assets unless they specifically give instructions to do so. 

“Coinbase always holds customer assets 1:1. This means that funds are available to our customers 24 hours a day, 7 days a week, 365 days of the year,” he clarifies.

“We hope that the clarifications above provide you — our customer — with confidence and clarity. We apologize for the confusion around the disclosure. Even though it was in response to guidelines applicable to any publicly traded crypto custodian from an important regulator, it caused unnecessary uncertainty and anxiety. The crypto space is a dynamic one, and we will always seek to use the best structures to ensure that our clients’ assets are managed in the safest way possible,” mentions Grewal in the blog post. 

Lays off 18% of workforce

Coinbase also announced that it will lay off 18 per cent of its workforce owing to economic conditions and rapid expansions. 

“We appear to be entering a recession after a 10+ year economic boom. As we operate in this highly uncertain period in the world, we want to ensure we can successfully navigate a prolonged downturn,” says Brian Armstrong, CEO and co-founder.

“Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market. The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged,” he adds. 

According to Armstrong, the company has exceeded the limit of employee integration.

“We have seen ourselves slow down considerably due to coordination headwinds, and difficulty fully integrating new team members,” he says.