Is Coinbase Safe?

The short answer is yes, but we’ll take a closer look at this in 3 parts below.

Company Legitimacy

As a company operating in the United States, Coinbase is required to comply with U.S. laws and regulations, at both a federal and state level.  Here are some of the laws, regulations, and regulatory bodies that Coinbase complies with:

Registered as a Money Services Business with FinCEN.

Complies with the Bank Secrecy Act.

Complies with the USA Patriot Act.

Complies with state money transmission laws and regulations.

These regulations and laws force accountability onto Coinbase, something that may be lacking from some of their offshore competitors in other countries with less strict regulations.

Aside from the United States, none of the other 31 countries, where Coinbase operates, require licenses to operate a cryptocurrency business.

It’s also worth noting, Coinbase has many trustworthy investors backing the company.  These investors include Alexis Ohanian (Reddit Co-Founder), Bank Of Tokyo, Blockchain Capital, and Digital Currency Group.

Personal Account Security

Coinbase offers its users a variety of features to secure their personal accounts.  You should also use a strong, unique password.

Multiple 2-factor authentication (2FA) methods are available to help secure your account.  The most basic 2FA option is through SMS texts, but we recommend setting up a third party 2FA app.  Options for this include Google Authenticator and Authy.

You can also track the activity of your account and get notified if a new device or IP address attempts to access your account.

Coinbase offers customers a 2-factor authentication method, which can be through SMS to your phone, or through third party apps such as Google Authenticator or Duo. In addition, Coinbase notifies users if a new device or IP address attempts to access your customer account. However, despite this, if customer accounts are compromised, Coinbase does not accept any liability for funds being lost. For that reason, it is typically recommended that once you have purchased any cryptocurrency on the Coinbase exchange, you store this cryptocurrency offline in a wallet that you control.

Safe Keeping of Funds

Coinbase segregates customer funds from company operational funds.  These customer funds are held in custodial bank accounts.  This means they will not use funds of yours to operate their business.  They also claim, “Even if Coinbase were to becomes insolvent, the funds held in the custodial bank accounts could not be claimed by Coinbase or its creditors.  The Funds held in those accounts would be returnable to Coinbase’s customers.”

98% of customers’ cryptocurrency funds are stored in secure offline cold storage.  These cryptocurrencies are held on multiple hardware wallets and paper wallets.  The physical cryptocurrency wallets are then stored in vaults and safety deposit boxes around the world.  These measures protect customers’ funds from being lost or stolen by hackers.

The remaining portion of cryptocurrency, that is stored online, is fully insured by a syndicate of Lloyd’s of London.

United States residents who use Coinbase’s USD wallet are covered by FDIC insurance, up to a maximum of $250,000.

It’s important to note that, despite all of this, customers are still liable if their personal accounts are compromised.  This is why it’s typically recommended to store your cryptocurrencies in an offline cold storage wallet that you control.  You can view our recommended wallets here.

Customer Support

Coinbase offers customer support through email.  In our personal experiences, we’ve typically received responses from support within 24-72 hours.  For general questions, they have an extensive FAQ.

 

Readers should be reminded that it’s always best practise not to store digital currency portfolios in an online-wallet system. Yes, Coinbase is the safest exchange for buying and selling. But please stay realistic with regards to your long-term storage strategy.

In recent times the website has been overloaded with new users flooding in to take advantage of the crypto boom. Such an influx has led to significant delays for customer support and verification

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