Coinbase Clears Up cbBTC Refund Policy Amid User Concerns
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Coinbase Clears Up cbBTC Refund Policy Amid User Concerns

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Created 2mo ago, last updated 2mo ago

Coinbase Chief Legal Officer Paul Grewal has come forward to clear the air on the company's refund policy.

Coinbase Clears Up cbBTC Refund Policy Amid User Concerns
Coinbase Chief Legal Officer Paul Grewal has come forward to clear the air on the company's refund policy. This statement has been released in response to speculation and uncertainty raised in the past week over the user terms of service for the "wrapped Bitcoin" offering.

Grewal firmly assured that Coinbase would fully pay customers in the event that it lost the underlying Bitcoin for whatever reason, if a gross negligence occurred, or some other malicious behavior.

The assurance was to soothe fears roused by a controversial provision of the cbBTC user agreement that to some meant customers would be shortchanged in case the assets went missing.

The drama kicked off when one pointed out what they said was an alarming clause in the agreement, which showed Coinbase would return only "proportional share of whatever BTC is left," and not full compensation to users in case of a loss.

Speaking to these latter concerns, Grewal said the policy is intended to protect the exchange's liabilities from external losses caused by sophisticated trades and leveraged positions clients may take using the cbBTC. He gave a scenario where traders collateralize cbBTC on third-party lending platforms and happen to experience liquidation due to the loss of the underlying Bitcoin, Coinbase would return the lost Bitcoin without covering additional fees or monetary losses incurred by the liquidation of the loan itself.

The cbBTC launch also happens at a time of controversy about the BitGo Wrapped Bitcoin (WBTC) product and the role of Tron founder Justin Sun. On both fronts, news has been brewing with BitGo announcing a multi-jurisdiction agreement for asset custody and a movement by some developers to implement a proposal that diminishes the influence of Sun.
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