Launched in 2012, Coinbase is one of the largest cryptocurrency exchanges in the industry. With over 8 million monthly users and a valuation of over $10 billion, it is a behemoth.
But you may be wondering, how safe is Coinbase?
After all, the space is rife with hacks and with industry leaders such as Celsius going bankrupt it appears that nobody is safe. But don’t worry.
In this article, I will be covering whether Coinbase is safe and much more. So without further ado, let’s jump right in.
Is Coinbase safe?
Located in the United States, Coinbase is subject to extensive regulation, and as a result, it is extremely safe. In the US alone they hold over 40 licenses to operate.
Not to mention, the recent introduction to the NASDAQ required Coinbase to abide by certain company management and financial reporting procedures.
Regarding insurance, US customers that hold dollars in their custodial account are insured by FDIC for up to $250,000 per individual.
When it comes to their reputation they are backed by several positive reviews. For instance, they have been awarded an Investopedia score of 4.8 and a business insider security score of 4.5.
Not to mention, it uses several security standards to protect against hacking. This includes 2-factor authentication, email/phone verification, and biometrics.
Coinbase security measures
KYC – the use of KYC requires users to disclose their identities. Proof of address and an identification card is required for all users to interact with the platform. As a result, bad actors are dissuaded from the exchange as ultimately if their identity is disclosed they are held accountable for their actions.
Cold storage – the vast majority of Coinbase’s cryptocurrencies are held in cold storage. Overall, they store over 97% of cryptocurrencies offline. This reduces the number of attack vectors hackers can leverage considerably.
Tools & technology – firstly, Coinbase uses AES-256 encryption for all personal data and stores copies in multiple locations for added security. Additionally, as mentioned previously users can opt for 2-factor authentication and sim verification.
Employee screening – All employees are screened based on criminal history and are required to pass an extensive background check.
The risks of using Coinbase
Hacks – all in all, Coinbase is still susceptible to hacks. This was shown in 2021 when over 5000 users’ accounts were hacked in a multi-factor authentication exploit.
Phishing – With phishing scams, projects imitate official sources to get personal information and access investors’ accounts. Oftentimes, they will impersonate Coinbase customer support to lure unsuspected customers.
They then leverage the information retrieved to access users’ exchange accounts and steal funds.
Regulatory uncertainty – unfortunately, the cryptocurrency market has little clarity surrounding regulation. For instance, what is defined as security or not is ambiguous. Therefore, as the industry continues to grow the increased regulation will either hinder safety or increase it.
Crypto scams – although Coinbase screens the cryptocurrencies they add to the platform many projects turn out to be scams. Oftentimes, projects code exploits or cease support.
Consequently, investors are left with worthless tokens. Overall, all of the cryptocurrencies held on the exchange are inherently risky.
FAQ
Is Coinbase FCA regulated?
Coinbase is regulated under the FCA with a register number of 900635. In essence, the FCA operates in the UK and ensures the highest level of security for financial markets.
Can Coinbase freeze accounts?
Yes, Coinbase can freeze accounts. Ultimately, they have full control of assets held in custodial accounts. However, it is extremely rare.
Is my crypto safe on Coinbase?
Cryptocurrencies stored on Coinbase are not insured. If your assets are stolen then you will probably not be compensated. Therefore, it is safer to store them in a hardware wallet.
The hardware wallet that I recommend is the Ledger Nano X. You can check out my review here.
If you want to view the article in video format check out the video below:
Conclusion
Overall, Coinbase is extremely safe. This is evident by the extensive regulation they are under as well as the security technology they employ.
From enabling 2-factor authentication to sim verification there are several ways for users to safely use the platform. That being said, there is always a risk of hacks and scams.
Therefore, it is important to stay vigilant and only store an amount you can afford to lose on exchanges. After all, not your keys not your crypto.
I hope you found this article useful and thanks for reading it. Want to learn about blockchain traceability? Click here to read my previous article.
