Coinbase’s chief legal officer, Paul Grewal, has addressed concerns regarding the user terms of service for the newly launched cbBTC “wrapped Bitcoin” product. Grewal reassured users that Coinbase would fully reimburse them in the event of the exchange losing the underlying Bitcoin.
The clarification came after a user pointed out a provision in the cbBTC user agreement that seemed troubling. The provision stated that Coinbase would not reimburse customers the full amount of Bitcoin lost due to malicious activity or unforeseen events, but rather provide them with a “proportional share of whatever BTC is left.”
Grewal confirmed that the policy aims to limit the exchange’s liabilities from external losses resulting from complex trades and leveraged positions entered by clients. For instance, if a trader uses cbBTC as loan collateral on lending platforms and experiences a liquidation due to the loss of underlying Bitcoin from malicious activity, Coinbase would fully reimburse the lost Bitcoin. However, the trader would not recoup any fees or monetary losses from the loan liquidation itself.
Coinbase launched cbBTC on September 12, making it available to residents in the United Kingdom, Australia, Singapore, and all US states except New York. The launch occurred amidst controversy surrounding BitGo’s Wrapped Bitcoin (WBTC) product and Justin Sun’s involvement in the project. BitGo had previously announced an agreement to split the custody locations of the underlying Bitcoin between Hong Kong, Singapore, and the United States. Concerns about Sun’s involvement led to the Sky community voting to remove WBTC from the platform in a governance vote.
Coinbase’s cbBTC has gained significant popularity and has become the third-largest wrapped BTC token in just one week. The rise in popularity comes as the community questions whether Bitcoin has become a worse version of Ethereum and explores potential solutions.