Media reports that the White House plans to require crypto exchanges to segregate customer and corporate funds

The Biden administration will pressure Congress to compel crypto exchanges to keep customers’ assets separate from corporate funds. This, according to CoinDesk, citing a well-placed source.

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A source told the publication that, as an argument, the White House uses the recent 10-Q report Coinbase filed with the U.S. Securities and Exchange Commission (SEC). According to the document, customers’ funds could be frozen if the company declares bankruptcy.

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“Because digital assets held in custody may be considered property of the bankrupt, in the event of bankruptcy the assets we hold on behalf of our customers may be subject to bankruptcy proceedings. Such customers may be treated as our primary unsecured creditors,” the report says.

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After the collapse, unsecured creditors usually lose all their assets, as they stand last in line for reimbursement of funds.

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Coinbase chief Brian Armstrong stressed that the exchange does not face bankruptcy risk, and that customer funds are safe. He said the report added this item due to new regulator requirements.

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2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties. https://t.co/lwmgb1kFtA

— Brian Armstrong — barmstrong.eth (@brian_armstrong) May 11, 2022

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“We have no bankruptcy-related risks, but we included a new risk factor based on the SEC requirement called SAB 121. It is a new disclosure obligation for public companies that hold third-party crypto assets,” Armstrong wrote.

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The requirement to separate corporate and customer funds is является стандартным for traditional firms in the United States. Market participants typically pool these funds, though the industry itself is regulated more strictly.

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Earlier in March 2022, Biden issued an executive order directing federal agencies координировать свои усилия в регулировании криптовалютной индустрии.

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