Coinbase has stepped into the Prime Belief chapter case, submitting an amicus temporary to push again towards a movement that would threaten buyer asset protections.
In a Feb. 5 court docket submitting, the trade has urged the court docket to uphold Uniform Industrial Code (UCC) Article 8, a authorized framework that ensures custodial property stay clients’ property.
In accordance with the trade:
“Article 8 incorporates unambiguous statutory textual content that events might conform to deal with a number of property, together with money or digital property, as monetary property credited to a securities account, and that property topic to such settlement usually are not property of the custodian’s property.”
Paul Grewal, Coinbase’s Chief Authorized Officer (CLO), additional emphasised in an X publish that UCC Article 8 establishes a basic precept—buyer property saved by custodians don’t belong to the custodian. As a substitute, they continue to be the property of the rightful house owners.
In accordance with Grewal, Coinbase and Prime Belief have consumer agreements that clearly state that clients retain full possession of their property. He argued that any try and classify these holdings as a part of a custodian’s property throughout chapter would contradict these agreements and undermine authorized protections.
Grewal confused that UCC Article 8 is not only about crypto—it’s a foundational authorized safeguard designed to maintain buyer property separate from a custodian’s holdings. He warned that permitting property to be absorbed into Prime Belief’s chapter proceedings may erode market belief and disrupt monetary stability.
The problem arose after Prime Belief filed for Chapter 11 chapter in August 2023 following extreme monetary troubles. As a part of its chapter proceedings, the property’s managers filed a Dedication Movement on Jan. 15, proposing to merge buyer funds with the platform’s property.
Coinbase believes that granting this movement may set a harmful precedent that weakens clients’ authorized protections in crypto and conventional finance.
Contemplating this, the agency urged the court docket to reject the Dedication Movement to make sure that established authorized protections stay intact.
Grewal concluded that courts have constantly strengthened these rules and may do the identical on this case. He wrote:
“Defending buyer property is paramount to belief and safety.”
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