This is an archive of our post on Aave governance forum. Read the full thread here.

Section 9.1.5 of the User Agreement provides a clear statement regarding the ownership and title to BTC/cbBTC: “Bitcoin that has been wrapped as cbBTC are held by Coinbase as custodial assets for the benefit of holders of cbBTC, and ownership of and title to these assets shall remain with such holders and not transfer to Coinbase”.

As a general principle, Section 2.7 incorporates the same protections. It affirms that the title to all digital assets supported by Coinbase remains with the users, ensuring that these assets are not transferred to Coinbase under any circumstances. Coinbase holds these assets for its customers, which are legally separate from Coinbase’s own property. As a result, the assets are not subject to any claims by Coinbase’s creditors.

The explanations provided by Coinbase’s legal team are comprehensive and sufficient for conducting an asset review. They clarify the legal structure surrounding the ownership and custody of digital assets, ensuring that cbBTC holders retain full ownership rights. Nevertheless, this review should not be construed as a legal analysis of Coinbase’s potential insolvency, nor should it be directly compared to other insolvency proceedings. Each situation involves unique legal and factual circumstances, and while Coinbase has provided a well-structured custodial framework, a detailed legal analysis of hypothetical bankruptcy scenarios would require a much more in-depth examination of applicable bankruptcy laws and how they might interact with digital asset custody arrangements.