Armstrong said the exchange had "included a new risk factor based on an SEC requirement calledSAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties."

The 10-Q, filed with the SEC Tuesday, says: “Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors,” Coinbase wrote in its recent filing.

Coinbase also disclosed that this means that customers may believe keeping their coins on the platform would be considered “more risky,” which would in turn materially impact its financial position.

In the event of bankruptcy, a general unsecured creditorwould be considered having the most to lose, as they are last in line for claims.

"We believe our Prime and Custody customers have strong legal protections in their terms of service that protects their assets, even in a black swan event like this," Armstrong wrote in the tweet. "This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically."

Caitlin Long, founder and CEO of digital asset bank Custodia Bank (formerly known as Avanti) said in a tweet that this isn’t new and is an inherent problem with the regulatory structure used by most custodians.

“Wyoming addressed this by creating a new customer-friendly structure designed to respect segregation of customer assets in bankruptcy: the Wyoming special-purpose depository institution,” she said.

Coinbase stock is trading at $72, down 70% year to date.