Coinbase chief legal officer responds to cbBTC service terms fears
Coinbase chief legal officer Paul Grewal responded to recent fear, uncertainty, and doubt (FUD) surrounding the user terms of service for Coinbase’s newly launched cbBTC “wrapped Bitcoin” product — confirming that Coinbase would fully reimburse clients in the event the exchange loses the underlying Bitcoin (BTC).
The clarification came after one individual highlighted what they believed to be a troubling provision within the cbBTC user agreement — claiming that Coinbase would not reimburse customers the full amount of Bitcoin lost due to malicious activity or unforeseen events, but would instead give clients a “proportional share of whatever BTC is left.”
Source: Pledditor.
In a statement to Cointelegraph’s Alex O’Donell, the Coinbase chief legal officer verified that the policy limits the exchange’s liabilities from external losses arising from complex trades and leveraged positions clients may enter.
For example, traders who use the cbBTC as loan collateral on lending platforms and experience a liquidation following the loss of the underlying Bitcoin due to malicious activity would be fully reimbursed for the Bitcoin lost by Coinbase but would not recoup any fees or monetary losses resulting from the loan liquidation itself.
Source: Paul Grewal.
Related: Coinbase’s cbBTC wrapped Bitcoin coming to Solana — Breakpoint 2024
Coinbase launches cbBTC amid controversy
On Sept. 12, Coinbase launched cbBTC — a tokenized or wrapped version of Bitcoin — for residents in the United Kingdom, Australia, Singapore, and all US states except New York.
The announcement came amid controversy surrounding BitGo’s Wrapped Bitcoin (WBTC) product and Tron (TRX) Founder Justin Sun’s involvement in the project.
On August 9, BitGo announced it was entering into a multi-jurisdiction agreement that would see its asset custody locations for the underlying Bitcoin split between Hong Kong, Singapore, and the United States.
Following the widespread concerns about Sun’s involvement in the project, BitGo CEO Mike Belsche reassured the crypto community that Sun wouldn’t have the ability to move funds.
Source: Mike Belshe.
Since then, the Sky — formerly known as Maker — community voted to drop WBTC from the platform in a governance vote, and Coinbase’s cbBTC has surged in popularity to become the third-largest wrapped BTC token in only one week.
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