Coinbase Chief Legal Officer Paul Grewal responded to a recent FUD surrounding the terms of service for users of Coinbase's newly launched "bitcoin encapsulated" product, cbBTC, by confirming that Coinbase would compensate customers in full if exchanges lost their base bitcoins. The clarification came after someone pointed to a worrying clause in the cbBTC user agreement that stated that Coinbase would not compensate customers in full if bitcoins were lost due to malicious activity or unforeseen events, but would instead distribute them in proportion to the remaining bitcoins. Paul Grewal confirmed in a statement that the policy limits the liability of exchanges for external losses arising from complex trades and leveraged positions that customers may enter. For example, if a trader uses cbBTC as collateral for a lending platform and is liquidated due to malicious activity resulting in the loss of the underlying bitcoin, Coinbase will fully compensate for the lost bitcoin, but will not compensate for any fees or monetary losses incurred as a result of the loan liquidation itself.