Is Coinbase insured?

[legiteum]

(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?

[Aanuoluwatofunmi]

From what you quoted that they said, being partially insured does not cover for full insurance, which is in other terms what we may be termed as what can be of benefit to them and not their users, if we are considering a centralized exchange or platform, then we should know that there is no secured insurance cover that can stand in for us in case of anything happened, we should know that once we are under a centralized platform, nothing is secured.

[BlackHatCoiner]

It would likely create a fiasco similar to the Mt. Gox incident. Since their assets are primarily in Bitcoin and other cryptocurrencies, I don't understand what guarantees the security of that money.

It would be catastrophic in the short term. It would create tremendous panic, BlackRock funds would suddenly be in the possession of a hacker, and with the most popular exchange going bankrupt, it would, without doubt, shake a lot of weak hands.

[Orpichukwu]

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?

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.

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?

The quote from their policy's below should be able to explain that better. It means even with that large amount that they hold, there is a level of damage that the exchange will incur that every customer will have to suffer for the loss as no one will be refunded, so it's high risk to even trust a third party to hold your fund for you. They even made it clear that crypto currency is not a legal tender, which means your deposit is not protected by FDIC like they do for banks, which protects customers deposits. 
 
In conclusion, it always goes back to the regular preaching in forums. Not your key, not your coin. 

In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost.

[DeathAngel]

I personally have had doubts for a long time about their lack of transparency. They hold a lot of Bitcoin on behalf of Spot ETF providers. How do we know they are not playing the likes of Blackrock with paper Bitcoin? There is a huge risk that if Coinbase are pulling an FTX & claiming to hold coins they don’t have, we see the biggest rug pull ever, on par & maybe worse than Gox. Every time Bitcoin pumps hard over 2024, Coinbase goes down, with people unable to access funds or buy/sell Bitcoin. I don’t think they have enough Bitcoin to satisfy demand.

[Alpha Marine]

where would that leave Coinbase depositors?

It will leave them with a lot of losses. Most of which cannot be reclaimed.
These companies spend a lot to protect themselves if situations like that happen.
The worst part is there is nothing you can do about it, the money is gone. Sure, some people might get what they're owed, but those are mostly the top guys that can make a lot of noise. Cases like this take so much time in court and even after 3 years some people would not have received anything and may never receive it.
This is why leaving your money in an exchange is never advisable. They will tell you how safe your money is and all, but that's what everybody does, you don't expect them to tell you that your money is unsafe with them.

If anything like that were to happen, for the short term, Bitcoin price would also take a major hit, but after a while, it will be corrected.

[legiteum]

I don’t think they have enough Bitcoin to satisfy demand.

(!!!) While I wouldn't have any specific info to agree or disagree with that, that is... quite a claim. File it under, "big, if true".

Seriously, $100B+ is a... lot of money. Somebody should... look into this. (And I'm not being sarcastic here).

If anything like that were to happen, for the short term, Bitcoin price would also take a major hit, but after a while, it will be corrected.

Would it? Why?

One thing that has been very clear in the last 10 years is that most investors in Bitcoin don't want to hold their own keys. Indeed, the idea that a major investor would want to go to the trouble of creating a ultra-high-security facility to hold millions in physical assets is bonkers. These investors deal with a a trading screen and nothing else, and they work in fancy air conditioned offices, not at Fort Knox. They are very happy to pay another company like Coinbase to deal with all of that because their business is finance, not security.

All of these investors invest in Bitcoin under the assumption that it's effectively just like buying stock in APPL or NVDA in terms of safety and convenience. If that structure was shaken, all of the "big" money would pull out of Bitcoin, and most average consumers would be terrified to hold more than a few hundred dollars lest they be robbed or killed for their keys.

I think more people need to understand that Bitcoin's current price is based on millions of consumers investing in Bitcoin, not a few of us hardcores on Bitcointalk.org .

[Potato Chips]

Honestly, I would expect a big company like coinbase to have several backups of user data otherwise it's gonna be a tricky situation if shit happens.

And the bottomline is still cryptocurrencies are not insured. I guess they have taken steps in case shit happens but you could tell they're not confident about it.

This bit screams like the typical "we will do our best" to me which promises nothing in particular but provides a positive outlook nonetheless.

In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost.

[legiteum]

Honestly, I would expect a big company like coinbase to have several backups of user data otherwise it's gonna be a tricky situation if shit happens.

Um, backups of the data won't prevent it from being stolen. And the more places you spread the data around to, the more places need to be secured.

I'm not saying it's impossible to secure it, but it's not as simple as making backups.

And the bottomline is still cryptocurrencies are not insured. I guess they have taken steps in case shit happens but you could tell they're not confident about it.

Based on that wording, I think they are clearly covering their butts here. If they were really insured such that it would protect their depositors, they would say so.

So.... while we're at it here, does anybody know: is Binance insured? Is there such a thing as an insured store of crypto anywhere?

[SquirrelJulietGarden]

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

Coinbase has 9,480 BTC for their own company that is 1.31% of current marketcap or 0.045% of Bitcoin total supply (21M bitcoins).
https://bitcointreasuries.net/
https://bitcointreasuries.net/entities/coinbase

But they are holding more bitcoins as a custodian of many Bitcoin Spot ETFs.
https://blockworks.co/bitcoin-etf

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?

The information officially on Coinbase website is like other companies. They won't guarantee that in incidents when their company, this case is Coinbase, got big problems, they will pay customers 100%.

With this information, if you dig deeper, Coinbase probably don't have their company treasury pegs as 1:1 in fiat currency:cryptocurrency. They are not a stable coin company and this 1:1 peg in treasury is not applicable to their company.

In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost.

Yes, it's not safe to store your cryptocurrency on Coinbase or any custodian platform.
Reminder: do not keep your money in online accounts

[PrivacyG]

It would likely create a fiasco similar to the Mt. Gox incident. Since their assets are primarily in Bitcoin and other cryptocurrencies, I don't understand what guarantees the security of that money.

The catastrophe this would generate is unimaginable if you think about it.  That much Money lost all of a sudden, so many people losing their Money in an instant, it is as if an International Bank collapsed.

It could also generate a lot of hatred and callouts for harsher and stricter Regulations.  I, for one would not want my Money to be sitting in such a large Wallet.  The risks are simply insane.

[yhiaali3]

Of course it is not secure, what makes Coinbase different from Mt. Gox or any of the other hacked exchanges or even FTX? Nothing of course, hacking can happen at any time and theft from the inside is not ruled out either.

Nothing guarantees customer funds on any centralized exchange, everyone knows that centralized exchanges are not secure but unfortunately some people are too lazy to keep their crypto assets themselves so they prefer to deposit them in centralized exchanges to protect them instead or simply buy shares in centralized ETF companies.

[Synchronice]

(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?

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.

[Japinat]

yes they are insured but up to $250k only per account.

Our custodial accounts have been established in a manner to make pass-through FDIC insurance available up to the per-depositor coverage limit then in place (currently $250,000 per individual).

So make sure your deposit doesn't exceed their insurance limit. It’s always wise not to keep your Bitcoin on an exchange since you don’t own the keys. Exchanges are mostly for trading purposes only, so as long as your capital isn’t too large, your funds should be safe as long as they don't exceed the coverage ceiling.

[legiteum]

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.

[BlackHatCoiner]

It could also generate a lot of hatred and callouts for harsher and stricter Regulations.

Which would be bad for centralized exchanges, and good for decentralized exchanges. There's really not much more you can regulate than what's already been regulated. It's just the nature of Bitcoin that can be trivially moved across time and space anonymously, if one compromises your setup.

yes they are insured but up to $250k only per account.

It still doesn't make sense to me how they plan to cover $250,000 for each account with compromised crypto, given that most of Coinbase's assets are in crypto.

[Potato Chips]

Um, backups of the data won't prevent it from being stolen. And the more places you spread the data around to, the more places need to be secured.
I'm not saying it's impossible to secure it, but it's not as simple as making backups.

I was talking about if user data is destroyed which is essential in cross-checking who owns which but perhaps it's not what you meant here: 🤔

If they are hacked and the addresses get destroyed or stolen (we'd never know which),

yes they are insured but up to $250k only per account.

It still doesn't make sense to me how they plan to cover $250,000 for each account with compromised crypto, given that most of Coinbase's assets are in crypto.

It is worth noting that only fiat deposits are insured because coinbase stores them in FDIC-insured banks-- probably doesn't apply to non-US coinbase customers as well tho cmiiw. Cryptocurrencies remain uninsured.

[legiteum]

I was talking about if user data is destroyed which is essential in cross-checking who owns which but perhaps it's not what you meant here: 🤔

I think got what you meant, I was just pointing out that securing crypto is two things at once: making sure it isn't deleted and making sure it isn't discovered. Either one of these things can cause a major disaster, so you have to do both at the same time. It's far easier to do one or the other, but doing both at the same time compounds the complexity.

If they are hacked and the addresses get destroyed or stolen (we'd never know which),

yes they are insured but up to $250k only per account.

It still doesn't make sense to me how they plan to cover $250,000 for each account with compromised crypto, given that most of Coinbase's assets are in crypto.

It is worth noting that only fiat deposits are insured because coinbase stores them in FDIC-insured banks-- probably doesn't apply to non-US coinbase customers as well tho cmiiw. Cryptocurrencies remain uninsured.

You can store USD in your Coinbase account just like at any bank. USD holdings would be FDIC insured.

I'm actually not sure about non-US residents storing USD (or cash equivalents) in a US-based FDIC-insured bank.

If only there was a rep from Coinbase here to clear all of this up for us .

[NotATether]

Unless they have a SAFU fund like Binance and publish their audits on their website for everyone to see (unlike Binance [until very recently]), you should always assume that they are not insured. In fact, they carry this very warning if you visit from the UK (British government requires all platforms to have this kind of notice).