US administration likely to ask crypto exchanges to separate customers’ money and corporate funds

The Biden-led US administration is likely to demand the US lawmakers to oblige

cryptocurrency exchanges

to keep their customers’ money separate from their own corporate funds,

CoinDesk

reported on May 18. This has followed after the Coinbase founder

Brian Armstrong

’s disclosure about the financial vulnerability of the customers in the condition of a bankruptcy citing the US Security Exchange Commission’s (SEC) requirement of SAB 121 in the 10-Q form.

According to provision in the 10-Q from, since the custodially held

crypto assets

can be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets held in custody of crypto exchanges could be subject to bankruptcy proceedings and such customers could be treated as general unsecured creditors. Thus, in case of a bankruptcy, the general unsecured creditors would be losing the most as they are last in line for claims. This problem can be addressed by creating a new customer-friendly structure that ensures segregation of customer assets in bankruptcy.

The Federal officials will push for segregation of customers' funds and corporate funds in the coming weeks and try to bring the change in any of the existing crypto bills considered by Congress, CoinDesk reported. SEC Chair Gary Gensler also advocated the issue at a conference this week.

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