In recent days, Coinbase (a crypto-currency exchange in the US) sent a note around to its customers that included the following information:
In the event of two separate blockchains after August 1, 2017 we will only support one version. We have no plans to support the Bitcoin Cash fork. We have made this decision because it is hard to predict how long the alternative version of bitcoin will survive and if Bitcoin Cash will have future market value.
This means if there are two separate digital currencies – bitcoin (BTC) and bitcoin cash (BCC) – customers with Bitcoin stored on Coinbase will only have access to the current version of bitcoin we support (BTC). Customers will not have access to, or be able to withdraw, bitcoin cash (BCC).
Some users on the networking site Reddit, have openly called for a lawsuit by Coinbase users.
While this article does not offer legal advice, it is not difficult to understand the foundation of the concern by the Reddit users. When the bitcoin block-chain split/forks on August 1, the chain's value is divided in some percentage between the competing chains.
The mining power that splits off and the users that split off, effectively take some amount of the chain's power with them (whether that is 1% or more). Anyone who owns bitcoin at the time of the split would receive the bitcoin cash coins, so that they are made whole and have the full value of the chain after the fork. The coins are not "new value", they are simply some manner of split of the old system's value.
These bitcoin cash coins are provided at no cost to bitcoin holders, because the new cash coins represent a split of the network power that they owned the moment before the split. Coinbase is not simply saying that they will not support the new coin, they are blocking their customer's ability to be made whole since the cash coins owed to the customers merely represent a portion of the chain's power that they already owned.
By telling its customers that they will not have access to the coins, coinbase is effectively reducing the value of its customers holdings and depriving them of the full value of their asset. Coinbase can do this because they hold the private keys for their client's coins and the private keys are necessary to claim the bitcoin cash coins.
Given that the bitcoin cash coins are available at no additional cost, this might be very frustrating for some coinbase users. The fact that coinbase is regarded as being aligned with bitcoin "core" as opposed to bitcoin cash, suggests to some people that this is, in part, politically motivated. That may or may not be true, but the result is the same - that clients are stripped of the part of the value that splits off, which they owned immediately before the fork.
Another good question is what is going to happen to the bitcoin cash coins? Whether coinbase gives them to their customers or not, they still exist. Given that coinbase control's their clients private keys, it is assumed that coinbase will simply keep the bitcoin cash coins. That assumption may or may not be correct, but at present coinbase has not offered any other explanation that i am aware of.
If coinbase were to enrich themselves by keeping the cash coins that rightfully belonged to their customers, that would be an extremely troubling scenario in my personal opinion. Given what some Reddit users have been saying, it may well be the case that someone eventually consults a class action lawyer and coinbase would need to justify their actions. Maybe coinbase would be able to justify their actions, but the moral justification is not immediately apparent to me, but i am not aware of what laws might apply in the US.
Coinbase might note that there is no obligation for any customer to keep the coins on their system and they have provided notice of their position. However, my understanding is that coinbase only provided notice in the last few days and that is not a lot of time for people to take steps even if they did immediately become aware and weren't out of town, having an email issue etc. Even if they had become aware, i understand that there may be withdrawal limits per day, time required to get coins out of coinbase's vault system, etc etc.
Given that the forked bitcoin cash coin has at times been trading at $470 per coin on certain futures exchanges, the lost value to coinbase customers could be considerable. A number of exchanges and wallets have already committed to supporting the forked coins as well.
(This is neither a legal opinion nor legal advice of any kind. Any opinions expressed are simply personal thoughts and the author does not suggest that they are correct or accurate in any way).
