Is Coinbase Safe?
As most of you already know, Coinbase is one of the oldest and the largest cryptocurrency exchanges in the world. It is available in more than 30 countries and has more than 4 million customers all over the globe. The users of Coinbase can buy and sell three of the most popular cryptocurrencies out there: Bitcoin, Ethereum, and Litecoin by using different payment methods like a bank account, SEPA transfer, PayPal etc.
By being the most popular intermediary in the volatile and yet unexplored market that is cryptocurrency, it is only logical that the following question arises: “Is Coinbase Safe?” Add to that an online modus operandi with handling money and it makes it perfect for questioning its safety. Here we will review the security of Coinbase and try to answer the “Is Coinbase Safe?” question.
- Coinbase Legitimacy
Since it is a company that is doing its business in the U.S., they are obligated to follow U.S. laws and regulations. And they need to do that at a federal and state levels. Some of the regulations that Coinbase conform with are:
- The company is registered as a Money Services Business with FinCEN.
- Bank Secrecy Act.
- USA Patriot Act.
- State money transmission laws and regulations.
These laws and regulations are what separates Coinbase from other offshore competitor exchanges located in countries that offer less strict laws and regulations and provide an initial answer to the question “Is Coinbase Safe?”.
Note: Apart from the US, other countries Coinbase operates in, do not require certificates to conduct a cryptocurrency oriented business.
- Is Coinbase Safe for storing your funds?
With Coinbase, customer funds are separated from company funds and are stored in protected bank accounts. The company assures their customers that in the unlikely scenairio Coinbase goes bankrupt the customer funds stored in those accounts are not accessible by Coinbase creditors and would be deposited back to the customers.
98% of customer funds are held in an offline storage in the shape of multiple physical wallets, which are further kept in safety deposit boxes and vaults located all over the globe. That way Coinbase protects its customer funds from hackers.
The remaining 2% are stored online and completely insured by an insurance syndicate Lloyd’s of London.
Another nifty feature for United State resident users is the Coinbase Wallet FDIC insurance coverage, up to a maximum of $250,000.
Note: Despite all of these security measures, customers are always liable in the case of their private accounts being compromised.
- Is Coinbase safe for your personal information?
Coinbase uses Multiple 2-factor authentication (2FA) to secure its user’s accounts. The most basic 2FA method is using the SMS texts, but there is also an option of setting up a third party 2FA app like Google Authenticator and Authy, which is highly recommended.
Coinbase customers can also receive a notification if a new device from a different IP address attempts to log into their account.
- Is Coinbase Safe for transactions?
Since your email, phone number and many other personal information are required you might say that Coinbase is safe for conducting transactions. They can even connect your personal information with your IP address as an extra layer of safety.
Another security measure is that each transaction request uses a new address, which prevents other users from connecting cryptocurrency addresses together.
On the other hand, Coinbase has been familiar with using the personal information to track their users and monitor their spending habits. They are also known for banning users based on their transactions. Users that were sending cryptocurrency to gambling sites or darknet had their accounts shut down. Even though those users are always paid back to their bank accounts, a cryptocurrency exchange should not decide where its users are spending their money.
- Is Coinbase Safe with its Wallets?
Online Wallets are one of the main worries when asking is Coinbase Safe? There are three types of cryptocurrency wallets that can be created with Coinbase and each has its security measures:
- Coinbase Bitcoin Wallet
With this wallet, your cryptocurrency is controlled by the Coinbase. That means that you have to trust the company to keep your coins secure, and of course take good care of your login credentials. Even though Coinbase is an international company with over $100 million in funding, the point of cryptocurrency, much like any other currency, is that customer has total control over its funds.
- Coinbase Vault
The newly added Vault feature allows the user to share his account with 2 or more users. That means that all of the users that are sharing that account need to approve any transaction before it processes. All transactions have 48-hour delay that allows users to prevent a potential unauthorized transaction being processed.
Although this is a more secure option than the first one, it is still controlled by Coinbase and not by the user.
- Multisig Vault
For total control over your funds on Coinbase, you must use this wallet. It uses a multi-sig method where there are 3 keys. One is held by the account owner, the second one is held by Coinbase and the third one is held by another user who shares your account. The shared key is encrypted with your password for security.
So, in case the Coinbase goes down you will still have your own key and the shared one. That way you will be able to transfer funds from your account without the control of the company.
We believe we have provided you with enough information to answer the popular question related to this cryptocurrency exchange. Is Coinbase Safe? Well, we think that as far as cryptocurrency exchanges go, this one is probably the safest and the most trustworthy of them all. The fact that they follow the US laws and regulations and offer insurance really separates them from the competition. On the other hand, the monitoring of user transactions and control of their funds is something Coinbase needs to work on in the future.