Originally published on: September 22, 2024
Coinbase’s chief legal officer, Paul Grewal, has responded to recent worries about the terms of service for the newly launched cbBTC Wrapped Bitcoin product. Amid fear, uncertainty, and doubt (FUD) surrounding the user agreement, Grewal confirmed that Coinbase would provide full reimbursement to clients in the event of a loss of the underlying Bitcoin.
The concerns arose when an individual pointed out a specific provision in the cbBTC user agreement, suggesting that Coinbase might not fully reimburse customers for lost Bitcoin due to malicious activities or unexpected events. Instead, clients would receive a proportional share of the remaining BTC.
In a statement to Cointelegraph’s Alex O’Donnell, Grewal clarified that the policy limits Coinbase’s liabilities from external losses resulting from complex trades and leveraged positions that clients may engage in. For instance, if traders use cbBTC as loan collateral on lending platforms and face liquidation due to the loss of underlying Bitcoin from malicious activities, Coinbase will reimburse the lost Bitcoin but not cover fees or monetary losses from the loan liquidation itself.
Coinbase rolled out cbBTC, a tokenized version of Bitcoin, on Sept. 12 for users in various countries, excluding New York. The launch came amid controversy over BitGo’s Wrapped Bitcoin product and Justin Sun’s involvement in the project. Despite concerns over Sun’s role, BitGo assured the crypto community that he would not have control over the funds.
Following challenges with WBTC on the Maker platform, which was recently removed in a governance vote, Coinbase’s cbBTC has quickly gained popularity and become the third-largest wrapped BTC token in just one week.
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