Coinbase is one of the biggest and most popular cryptocurrency exchange platforms. As an investor, you can buy and sell Bitcoin and more than 50 other cryptocurrencies on Coinbase.
Launched in San Francisco, California, in the year 2012, Coinbase has grown significantly. It serves over 68 million verified customers, 9000 institutions, and 160,000 ecosystem partners, in more than 100 countries. Investors trade more than $300 billion on the platform in each quarter.
In short – Coinbase is a safe platform to buy, sell and store crypto. They have account level security features that are better than industry standards and other security layers with respect to the storage of crypto. However, exchanges are susceptible to hacks and it is important you do everything to protect your funds. Read on to know more about the safety features of Coinbase.
The two main elements that helped Coinbase to achieve such massive success:
2. Security features
The user-friendliness simplifies the process of crypto investing and trading. And the security features ensure that you can protect your money from thefts or breaches.
In this blog, we will focus on the most important question – ‘Is Coinbase safe’ i.e. the various security features of Coinbase. We will dive deeper into the security features Coinbase offers at both the account and platform levels.
Note: Coinbase is the first cryptocurrency exchange in the US to go public and list on the NASDAQ. Companies have to go through a lot of regulatory hurdles in order to go public, the fact that Coinbase is the only exchange that is publicly listed adds to the credibility of the platform.
How Safe is Coinbase?
Exchange accounts are only as secure as the account holder makes them. No company can deliver a 100% guarantee on your funds being secure. That said, Coinbase has many security measures. Some account level security features Coinbase offers are:
1. Biometric fingerprints that you have to verify to log in
2. 2-step verification measures (password and code)
3. Insurance for funds if there is a platform breach
4. Offline cold storage that stores 98% of users’ funds
Let’s learn more about these security features and decide if Coinbase is trustworthy.
1. ID Verification
With the introduction of KYC rules, users have to provide proof of identity. Users may also have to provide an address proof (only in cases where the proof of identity cannot be satisfactorily verified), to use the platform’s BUY and SELL features. This discourages registration by any user who seeks to remain unidentified. It thereby promotes credibility and trustworthiness amongst honest traders and investors. This allows them to use the full array of features on the platform.
Although the disclosure of personal information is not endorsed by many, strict KYC policies mandate the monitoring of transactions. However, there are limits to how much one can spend or withdraw without complete verification. Due to ID verification, the process of onboarding users is a little arduous. Considering additional verification reinforces security, it is a necessary formality to be met. You can read more about the account levels and limits here.
2. Offline Cold Storage of User Funds
98% of the users’ assets at Coinbase are stored in secure cold storage facilities. These are inaccessible to cybercriminals and distributed across the globe.
The 2% of assets available in the hot wallet is insured, and thus, if ever stolen, will be reimbursed.
Since digital currencies are not legal tender, they are not insured under the SIPC or the FDIC. Any insurance Coinbase provides is by pooling Coinbase balances. The amount can be held in USD-denominated money market funds, USD custodial accounts, or liquidated US treasuries.
3. Additional Security Features
For better security, Coinbase provides encrypted USD-insured funds (as mentioned above), customer wallets and their addresses, non-sensitive customer information, mobile application, and private keys.
Other preventive measures put in place for extra security are:
- Employee devices with unique passcodes and two-factor authentication
- Background checks on employees, especially criminal records
- Encrypted workstation hard drives, only accessible by select employees with solid passwords
Account users have three types of two-factor authentication procedures available to them –
2. TOTP Authenticator (such as Google or Duo – which provide random keys that are time-sensitive, for login), and,
3. hardware keys, similar to flash drives (such as Trezor or Ledger).
Server attacks that reveal classified information about customers and their assets do occur. Hence, all users are advised to never outsource their assets’ security. It is always wise to remain guarded with investments on the Coinbase platform.
How Secure is Coinbase Wallet?
The Coinbase wallet is a user-controlled non-custodial wallet. In case you forget your key, there is a 12-word recovery phrase that gives access to ONLY you. To access your wallet and move around your funds, you have to type the key into the system. This means that in case you are locked out, not even Coinbase can recover your funds.
Coinbase – Who is it For?
According to CoinMarketCap, Coinbase has the second-highest trade volume among all cryptocurrency exchanges. This indicates that new as well as seasoned investors find the platform reliable. Coinbase sure knows how to attract and retain its customers!
We understand that it is difficult to trust a digital brokerage with your assets. That is why Coinbase offers world-class security, which you can read on Coinbase Help.
When it comes to buying crypto, Coinbase has an easy process. You can just buy some coins, leave them in your wallet or on your account and track their value over time!
As a seasoned investor, the more advisable option of choice for you, would be Coinbase Pro. Coinbase Pro has significantly lesser processing fees and tighter security. It is a major factor that professional traders keep in mind when trading huge amounts of money.
Coinbase Main Offerings
Coinbase has 3 core products:
Coinbase.com: online crypto brokerage for retail customers
Coinbase Pro: a trading platform for seasoned investors
Coinbase Prime: for institutions
Coinbase offers an easy-to-trade interface for the relatively new-ish retail consumers.
For the more seasoned players in the game, Coinbase Pro provides many tools. These include chart-predicting software, with real-time indicators and a continuously revised “orders” book.
Coming to the premium institutions, Coinbase launched the beta version of Coinbase Prime. It primarily has features like hedge funds, endowments, sovereign wealth funds. All managed by expert fund managers, these features help provide access to deep liquidity pools.
Pros and Cons of Coinbase
- You can trade more than 50 altcoin varieties on the platform
- Educational tools for beginners that enable them to understand the basics of cryptocurrency
- Beginner-friendly user interface that makes it easier to learn and trade on, and,
- High liquidity that protects the user’s investment assets from a serious dipping in value in a very volatile market
- Coinbase charges higher fees for the features it offers. Users can make a free-of-cost shift to Coinbase Pro, although the advanced features that come with the upgrade, can be daunting
- This makes for a slim opening for hackers. They can find their way into your account, lock you out and steal the funds. An easy way to circumvent this is to keep money in the Coinbase wallet. If you do so, you can have access to an authentication code that ONLY you will ever know.
Safety Features of Coinbase Pro
Coinbase Pro has all the security features discussed with some additions. Coinbase Pro undergoes routine financial audits, under strict security. It keeps 98% of its user’s funds in cold storage with encryption, using multi-sig keys. The 2% balance of the user’s funds held online, either in the account or in the wallet, is insured against theft or losses.
With the above precautions in place, Coinbase Pro provides premium protection for your money. It is something that only a handful of brokerages can lay claim to!
The amount in the hot wallets is insured by Lloyd’s of London. For funds in US Dollars, the Coinbase Pro covers these with the FDIC, for an amount of $250,000 per trader.
However, Coinbase Pro has certain regulations, to not entertain any claims, concerned with the loss of funds. This is especially in case of mismanagement by the trader or any other fault on their part.
Coinbase Pro also has more stringent policies when it comes to ID verification. It allows only those users who can provide full-fledged proof of all credentials required.
Coinbase vs. Other Trading Platforms
According to an analysis performed by CryptoCompare.com, Coinbase ranks well. If compared with most US or European crypto exchanges like Gemini, Bitstamp, and Kraken, you will find Coinbase winning. Coinbase has adhered to the stricter regulatory standards that have followed in its footsteps after the emergence and popularity of Bitcoin over the years, making it better by leagues. It has really stood the test of time!
The analysis was based on several factors. These included:
1. how much of a customer’s crypto-assets can be stored in cold wallets, which don’t exist online and therefore, can never be hacked, and,
2. what kind of security protocols and insurances are in place, in case a breach occurs
It also attempted to measure each platform’s quality of data and price. There was also an analysis on the efficiency of monitoring programs that prevent the incidence of money laundering, which is a persisting issue of annoyance for the crypto industry.
Coinbase carries insurance against crime towards 98% of digital user assets. This includes cybersecurity breaches and losses against other thefts. Coinbase takes no responsibility for the losses of your assets if you’re involved in any way.
You can take care of your assets in that case, through FDIC-approved insurances. These reimburse you in case any FDIC-insured banks where custodial accounts are held, are breached. Coverage provided counts on Coinbase maintaining accurate customer records. It also depends on determinations of the FDIC as a receiver at the time when the bank is entrusted with a custodial account.
Can Coinbase be Hacked?
Due to their extensive and well-planned security measures, hackers cannot get easy access to the cryptocurrencies stored by Coinbase.
An elaborate phishing attempt was halted back in 2019. Hackers overtook several high-profile Twitter accounts and solicited funds from unsuspecting followers. The amount totalled about $280,000 in Bitcoin transactions. Other than that, Coinbase has been a secure platform for crypto investing and trading since Day 1!
Why Should You Trust Coinbase?
Cryptocurrency is a fast-growing industry. Standing out as a trustable digital brokerage is definitely not an easy feat. Yet, Coinbase seems to have achieved it all – in terms of fees structure, security, and user-friendliness.
Coinbase has over 40 licenses to operate in the US alone. It has legally made the list to work in another 31 countries.
Under the BitLicense program, Coinbase is one of the four brokerages eligible to operate in the state of New York. This is because it has been adherent to the strict KYC rules. It has also been compliant with all statutes and regulations. All of this makes it one of the most trustworthy and credible crypto exchange platforms.
Is Coinbase Secure – the Verdict!
Coinbase is one of the most trusted and safe exchanges in the current crypto landscape. With the strictness implemented in onboarding procedures and the trust-building norms with which Coinbase has operated all these years, it is no surprise that investors today trust the platform!
The high standards of Coinbase as a leading cryptocurrency investing and trading platform are because of –
1. strong cybersecurity measures,
2. use of latest technology,
3. the upholding of regulatory standards to the T and,
4. ensuring client funds along with encrypting customer data
This, in turn, creates a foolproof strategy to make the best out of using this platform!
In short, Coinbase is a safe and secure platform to engage in trying to understand digital assets and the trends in their trading and investment for both retail customers and institutional entities!
Anish loves reading, researching, and writing about crypto and blockchain. He started his crypto journey early in 2017, what started as a fad is now a full-time hobby. He curates guides after thorough research on platforms and is responsible for the most in-depth guides on the site. You will find him walking his dog (not Doge) when he is from his Laptop.