Biden administration responds to Coinbase bankruptcy procedure disclosure

Earlier this month, American crypto exchange Coinbase revealed that it might have to dip into customers' holdings on the platform to pay off debts in case of a bankruptcy filing. In response, US President Joe Biden's administration is reportedly looking to pass laws to force crypto exchanges to separate their customers' money from their own corporate funds.

In a filing last week, Coinbase said that “in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”

Regulations to protect customers of custodial services are standard in traditional finance, but the ad hoc growth of the cryptoverse has meant that these regulations have not been put in place yet.

While Coinbase made clear that they are nowhere near bankruptcy filings, and that this was just a necessary disclosure, the information has caused worries in a market that was recently decimated by the Luna and Terra valuation drops, as well as a prolonged bear market for Bitcoin.

According to CoinDesk, a source said that government officials will be attempting to negotiate legislation on the matter in any crypto bill that is being submitted in the near future.