Is Coinbase insured?

[philipma1957]

(Before I start this topic, I just want to say that I don't want to pick on Coinbase here specifically, but they are the biggest with over 10% of all Bitcoin being held for customers, so they are a good example--but assume here that this question could apply to any digital asset custodian).

Today, Coinbase is holding over $100 billion in Bitcoin.

While I am sure they go to great lengths to secure this money (!), we'd have to concede there is a non-zero chance they could lose some or all of this Bitcoin to theft or simply losing it.

And then what?

Coinbase offers this vague promise on their website that they are "partially insured", but does anybody know what that actually means? If they are hacked and the addresses get destroyed or stolen (we'd never know which), then... where would that leave Coinbase depositors?

okay they are fdic for cash which means all cash up to 250,000 is insured.

for all other who knows what coverage they have.

they had lloyds of London but for what amounts I do not know.

i keep cash on the site set for buy the dip

when and if a dip hits i pull the coins.

[batang_bitcoin]

It is hard to trust these exchanges today. We just have to learn from the past with so many exchanges that have bitten the dust. Coinbase might be big and it has got some stocks listed on the stock market but that doesn't mean that they can't end up the same as FTX, mt.gox, any other exchange whether they'd be hacked or by lacking of actual proof of reserve for their acclaimed funds from their customers. And speaking for the majority of them, you'll never know what can happen and if some of them pulls out to the market due to bankruptcy or any unforeseen event. We have to look at each cycle, there's always a surprising thing that comes from these exchanges.

[Ziskinberg]

Ah, okay, so 98% of their Bitcoin keys are "hack proof". "Absolutely impossible" to steal or destroy. If you make an absolutist statement like that in front of any serious infosec expert they will probably throw something at you . Security is not an absolute thing. I'm not saying you shouldn't trust Coinbase in the same way you get on a commercial airliner and feel safe, but never say "never".

(As a side note, in case anybody was wondering: yes, I am in this exact business with Haypenny. Like any digital currency we have to worry about infosec, and we take very strong measures to secure our data including keys physically held by two different roles that are kept physically apart. However, we also have mitigation plans in case of a catastrophic hack that would limit damage to a tiny fraction of customers).

There's no such thing as being hack-proof—just like humans aren’t immortal. So, what’s your point here, and what do you suggest regarding the topic you raised?

Financial institutions, like banks, have similar practices where all deposits are insured but only up to a certain limit. It’s the same with crypto exchanges, where a portion of deposits is insured. Even laws aren’t perfect. No government can insure all Bitcoin held on an exchange; their role is to assist in investigations if a hack occurs to recover lost funds.

The fact that 98% of the assets are in cold wallets makes hacking difficult, though not impossible. As traders, we must be aware that this is all an exchange can offer. If that doesn’t sit well with you, then perhaps it’s better not to use an exchange, as they generally follow similar standards, with only slight differences in how they implement them.

If you don’t trust the exchange, then simply don’t use them—store your Bitcoin in your own wallet, where your keys are your control.

[BlackHatCoiner]

Storing your wealth in the safest available way is certainly not irresponsible. I think it would be the opposite.

Giving your wealth to a stranger, with a history full of strangers going bankrupt and getting hacked, is certainly not the safest.

Meanwhile, storing your own physical keys involves risks, and people lose their Bitcoin this way all of the time.

Because they do it the wrong way. They are reckless and store them on Internet connected devices, with closed-source operating system, potentially affected with malware, and do not even verify the binaries. People who secure their wallet, the right way, and have lost them due to $5 wrench attacks are outnumbered by the number of victims who lost all their savings on Mt. Gox, FTX, BlockFi, Kucoin, Bitfinex and an endless list of others.

You're mistaken in the sense that you think a third party safeguards your wealth with legislation, as with houses or bank accounts, but this is different. It's easier to steal, and there is no insurance.

[legiteum]

Storing your wealth in the safest available way is certainly not irresponsible. I think it would be the opposite.

Giving your wealth to a stranger, with a history full of strangers going bankrupt and getting hacked, is certainly not the safest.

Sure. But nobody here is talking about giving your wealth to a... stranger (?).

Meanwhile, storing your own physical keys involves risks, and people lose their Bitcoin this way all of the time.

Because they do it the wrong way. They are reckless and store them on Internet connected devices, with closed-source operating system, potentially affected with malware, and do not even verify the binaries. People who secure their wallet, the right way, and have lost them due to $5 wrench attacks are outnumbered by the number of victims who lost all their savings on Mt. Gox, FTX, BlockFi, Kucoin, Bitfinex and an endless list of others.

I get that, but lots of people don't want to be bothered with all of that stuff and would rather pay somebody to do it for them. That's why people don't store their life savings in paper bills in their own home and there are these things called "bank" .

All things being equal, something secured by highly paid experts who have millions of dollars in resources and intense processes to help them should be far more secure than what any individual could possible come up with.

You're mistaken in the sense that you think a third party safeguards your wealth with legislation, as with houses or bank accounts, but this is different. It's easier to steal, and there is no insurance.

That was actually an implicit point of my OP here: that Coinbase could never be as safe as storing your USD in a US bank since they are not insured. No digital asset (or indeed, no thing at all) is as safe as USD in a US bank under the insurance max. But perhaps Coinbase (or some competitor, or some government) could offer such an insurance and that would be a valuable thing since it would make digital assets as safe as USD potentially.

[BlackHatCoiner]

But perhaps Coinbase (or some competitor, or some government) could offer such an insurance and that would be a valuable thing since it would make digital assets as safe as USD potentially.

And which is what I argue: They can't. It's much easier to steal, and it cannot be insured by a company that relies on those assets. This is not a bank. This is hard cash. Transactions irreversible. If a bank gets hacked, other banks can be informed and save the situation. Here it is different.

All things being equal, something secured by highly paid experts who have millions of dollars in resources and intense processes to help them should be far more secure than what any individual could possible come up with.

The endless list of hacks suggests that being a target is more significant than having a highly paid team of security experts.

[Synchronice]

Coinbase carries only crime insurance. If they experience data breaches or attack and you lose money because of that, they'll give you a refund but Coinbase doesn't claim how much money they'll refund.

They also don't say how much money they have insured, so, if you lose $1000 because of their mistake, you might receive $1000 or $200 or nothing, no one knows exactly because even if they partner with other insurance companies and are insured, there aren't guarantees that insurance company will cover the losses. There have been many cases when insurance company turned into a scam in the end.

Okay but... what good is that?

They are saying they will "partially" make you whole, but they don't say what "partially" means? So somewhere between 99% and 0.01%? That is the same as no promise at all.

Exactly! They say that they'll give you some money back but do not state how much it will be. Even if they were about to state, you should never build your hopes on that because when company goes bankrupt, users end up with nothing. That's why everyone always suggest to hold coins on wallet that you control. When your funds are in their hands, you are never safe.
Besides this, keep in mind that Coinbase states in their ToS that they can block your account and freeze your assets at any time, without giving you an explanation. This is a big red flag for me.

[vapourminer]

keep in mind that Coinbase states in their ToS that they can block your account and freeze your assets at any time, without giving you an explanation. This is a big red flag for me.

to be fair pretty much every exchange has those terms

[legiteum]

But perhaps Coinbase (or some competitor, or some government) could offer such an insurance and that would be a valuable thing since it would make digital assets as safe as USD potentially.

And which is what I argue: They can't. It's much easier to steal, and it cannot be insured by a company that relies on those assets. This is not a bank. This is hard cash. Transactions irreversible. If a bank gets hacked, other banks can be informed and save the situation. Here it is different.

Insurance companies insure very risky things all of the time. It potentially could cost a lot of money to insure, but it's certainly possible.

All things being equal, something secured by highly paid experts who have millions of dollars in resources and intense processes to help them should be far more secure than what any individual could possible come up with.

The endless list of hacks suggests that being a target is more significant than having a highly paid team of security experts.

Anybody with any significant amount of wealth is a target. The world we live in is not safe. That's just reality.

[philipma1957]

Storing your wealth in the safest available way is certainly not irresponsible. I think it would be the opposite.

Giving your wealth to a stranger, with a history full of strangers going bankrupt and getting hacked, is certainly not the safest.

Sure. But nobody here is talking about giving your wealth to a... stranger (?).

Meanwhile, storing your own physical keys involves risks, and people lose their Bitcoin this way all of the time.

Because they do it the wrong way. They are reckless and store them on Internet connected devices, with closed-source operating system, potentially affected with malware, and do not even verify the binaries. People who secure their wallet, the right way, and have lost them due to $5 wrench attacks are outnumbered by the number of victims who lost all their savings on Mt. Gox, FTX, BlockFi, Kucoin, Bitfinex and an endless list of others.

I get that, but lots of people don't want to be bothered with all of that stuff and would rather pay somebody to do it for them. That's why people don't store their life savings in paper bills in their own home and there are these things called "bank" .

All things being equal, something secured by highly paid experts who have millions of dollars in resources and intense processes to help them should be far more secure than what any individual could possible come up with.

You're mistaken in the sense that you think a third party safeguards your wealth with legislation, as with houses or bank accounts, but this is different. It's easier to steal, and there is no insurance.

That was actually an implicit point of my OP here: that Coinbase could never be as safe as storing your USD in a US bank since they are not insured. No digital asset (or indeed, no thing at all) is as safe as USD in a US bank under the insurance max. But perhaps Coinbase (or some competitor, or some government) could offer such an insurance and that would be a valuable thing since it would make digital assets as safe as USD potentially.

Coinbase is FDIC for 250,000 that is exactly the same as a bank for a US citizen. Same program.

So if you read what I said you would know that coinbase is great for setting a buy the Dip with cash since the cash is insured.

Ie
I have 48.1k price point for 2000 usd
I have 42.1k price point for 2000 usd

as long as we do not ever drop to those buys my cash is as safe as a bank as I am USA based.

BTW if you have cash and do not do something like I did for some of your cash it is plain dumb.

My cost for that buy the dip is I lose bank interest as coinbase does not provide interest on USD.

I am willing to do that.

I lose about 4.3% in a year as I can get 4.3% in my PayPal bank account which is also FDIC

[legiteum]

Coinbase is FDIC for 250,000 that is exactly the same as a bank for a US citizen. Same program.

That is only for USD that you store on the platform, not digital assets. If Coinbase lost their keys, most likely you would lose all of your crypto you have stored there and there would be no way of getting that money back.

[shield132]

Coinbase is FDIC for 250,000 that is exactly the same as a bank for a US citizen. Same program.

So if you read what I said you would know that coinbase is great for setting a buy the Dip with cash since the cash is insured.

Ie
I have 48.1k price point for 2000 usd
I have 42.1k price point for 2000 usd

as long as we do not ever drop to those buys my cash is as safe as a bank as I am USA based.

BTW if you have cash and do not do something like I did for some of your cash it is plain dumb.

My cost for that buy the dip is I lose bank interest as coinbase does not provide interest on USD.

I am willing to do that.

I lose about 4.3% in a year as I can get 4.3% in my PayPal bank account which is also FDIC

Enlighten me if I am wrong but as I understood, Coinbase is great for US citizens because it offers FDIC insurance up to 250K USD when Coinbase's US citizens keep dollar on their website. Once they buy crypto, they are not insured other than crime insurance and in the best case an user should withdraw coins immediately from Coinbase. If an user wants to trade, then they deposit, exchange and hold USD on their account for as long as they wish because they are FDIC protected. Am I right? But at the same time, this protection doesn't apply to non-US citizens and for such citizens, there is a different insurance.

[Abiky]

(Before I start this topic, I just want to say that I don't want to pick on Coinbase here specifically, but they are the biggest with over 10% of all Bitcoin being held for customers, so they are a good example--but assume here that this question could apply to any digital asset custodian).

Today, Coinbase is holding over $100 billion in Bitcoin.

While I am sure they go to great lengths to secure this money (!), we'd have to concede there is a non-zero chance they could lose some or all of this Bitcoin to theft or simply losing it.

And then what?

Coinbase offers this vague promise on their website that they are "partially insured", but does anybody know what that actually means? If they are hacked and the addresses get destroyed or stolen (we'd never know which), then... where would that leave Coinbase depositors?

There's no guarantee users of the platform will get their money back in case of hacks, theft, or bankruptcy. Coinbase is NOT FDIC insured (unlike banks). I guess people will proceed with a class action lawsuit if something unexpected happens in the future. If you want to play it safe, self-custody of your crypto would be the way to go. I'd quickly buy BTC or any other cryptocurrency from Coinbase, and store it in a wallet whose private keys/seed I control. Most people want convenience, so they'll prefer to leave their coins in the hands of a custodian (or middleman).

Fortunately for us, crypto regulations are getting stricter. So exchanges will think twice before "running away with the money". Both Mt Gox. and FTX customers are being compensated for their loss (reimbursement). Perhaps, Coinbase will do the same in case something bad happens in the long run?

[Japinat]

But at the same time, this protection doesn't apply to non-US citizens and for such citizens, there is a different insurance.

It’s really disappointing that this exchange only encourages deposits from U.S. citizens since they’re the only ones covered by insurance (up to $250k). For non-U.S. residents, all they get is the assurance of a strong security system--is that really it?

The insurance policy feels quite unfair since it's the same money and value. I haven’t seen any insurance policy like this, because in banking, all deposits are insured up to a certain amount, regardless of the depositor's nationality. It almost makes Coinbase's policy seem discriminatory.

[Minor Miner]

Fortunately for us, crypto regulations are getting stricter. So exchanges will think twice before "running away with the money". Both Mt Gox. and FTX customers are being compensated for their loss (reimbursement). Perhaps, Coinbase will do the same in case something bad happens in the long run?

Having more regulations and management from the government will help us minimize the risks when using CEX, but we should not be complacent that the government will always be on our side if an accident happens. Like banks, many customers are not protected by the government when banks lose their customers' money.

When the government intervenes, they probably won't run away with our money but it's horrible when they hold our assets for 10 years like MT.gox did. Mt.gox has compensated the victims after more than 10 years but I wonder how many people can wait and receive that money, and how they have lived for the past 10 years. So the best way is never to give our assets to any third party, it is best that we protect our assets ourselves.

[dificanovi]

You don't need to wait for what before you take action; all that's needed is safety. Never hold your coins on a centralised exchange or a custodial storage. Be your own security boss, and that will save you from the stress of thinking about what might happen later.

Just as Coinbase advised their users to use whatever security means necessary to protect their credentials from being accessed by thiefs since they won't be held responsible for any loss incurred by such action customers, as you need to be responsible for your own security; in other words, they should not hold anyone responsible other than themselves.

I agree with what you said, in the crypto world do not ask for responsibility to others for the losses we receive. In general, centralized exchanges will not be responsible for something that happens to their consumers who lose Bitcoin or Altcoin that is hacked. It is better for us to store the Bitcoin or Altcoin that we have in a hardware wallet so that it is safer and not easily hacked, only we supervise and are fully responsible for the security of the hardware wallet that we have.

[sunsilk]

Fortunately for us, crypto regulations are getting stricter. So exchanges will think twice before "running away with the money". Both Mt Gox. and FTX customers are being compensated for their loss (reimbursement). Perhaps, Coinbase will do the same in case something bad happens in the long run?

And before that happens, as a user do ourselves a favor for any counter measure and the best thing to do is to avoid anything at all.

Stop depositing huge amounts on them. There could be 'fund safu' just as Binance and coinbase but we can learn from FTX and Mt.gox that it takes time for them to refund all of the affected users.

Having more regulations and management from the government will help us minimize the risks when using CEX, but we should not be complacent that the government will always be on our side if an accident happens. Like banks, many customers are not protected by the government when banks lose their customers' money.

That is true, they minimize the risk but nothing is still guaranteed even if the government is there.

[Abiky]

Having more regulations and management from the government will help us minimize the risks when using CEX, but we should not be complacent that the government will always be on our side if an accident happens. Like banks, many customers are not protected by the government when banks lose their customers' money.

When the government intervenes, they probably won't run away with our money but it's horrible when they hold our assets for 10 years like MT.gox did. Mt.gox has compensated the victims after more than 10 years but I wonder how many people can wait and receive that money, and how they have lived for the past 10 years. So the best way is never to give our assets to any third party, it is best that we protect our assets ourselves.

Do you mean governments will bail out exchanges just like they've bailed out banks in the past? I doubt it. But with crypto entering its way into politics (especially in the US), things could change in the future. It's unfortunate to see how creditors are paid back only a portion of what they've had in the first place. Not like banks which have greater insurance coverage. Bank deposits in the US are insured by the FDIC up to $250k.

If crypto exchanges had a similar coverage, things would've been better. It'll be up to "crypto lobbyists" to do their thing for the good of the industry. Regulations are constantly changing, so fingers crossed investors will have better protections in the long run.

[Rikafip]

If crypto exchanges had a similar coverage, things would've been better. It'll be up to "crypto lobbyists" to do their thing for the good of the industry. Regulations are constantly changing, so fingers crossed investors will have better protections in the long run.

As far as I know, in order for crypto exchanges to get a license to operate in Japan, they have to able to secure user's funds so in case of the hack or something similar, users are safe. Thanks to Mt Gox, Japan learn their lesson and sooner or later that will come to other markets as well.

Many won't be happy with stricter regulations, but at the moment, centralized exchanges bring worst of both worlds.

[legiteum]

If crypto exchanges had a similar coverage, things would've been better. It'll be up to "crypto lobbyists" to do their thing for the good of the industry. Regulations are constantly changing, so fingers crossed investors will have better protections in the long run.

As far as I know, in order for crypto exchanges to get a license to operate in Japan, they have to able to secure user's funds so in case of the hack or something similar, users are safe. Thanks to Mt Gox, Japan learn their lesson and sooner or later that will come to other markets as well.

Many won't be happy with stricter regulations, but at the moment, centralized exchanges bring worst of both worlds.

This kind of insurance would definitely not be free though. Because it's so new, and so risky (compared to say storing USD which has been done for over 200 years), we would be talking about a much more complicated kind of insurance, so the regulations would be much more complicated as well.

In the US, we have FDIC insurance, but that comes with a lot of strings attached. Being an FDIC-insurance bank is very expensive and cumbersome.

You are probably right about government lobbying: the way of modern capitalism is, "privatize the profits and socialize the losses" . In other words, maybe Coinbase will try to get the US to insure them in case something goes wrong, and they will try to pay as little as possible for that insurance using their lobbyists.