While many cryptocurrency exchanges are legit, the lack of global regulation around the crypto market causes doubt in the minds of would-be investors. Coinbase is a leading online cryptocurrency exchange, but is Coinbase safe? This article provides a comprehensive look at the Coinbase crypto exchange and wallet.
Coinbase is a business operating out of San Fransisco, California. The company was founded in 2012 and has traded more than $50 billion, in US currency. Coinbase only trades the most reputable cryptocurrencies and is often used by traders as an entry platform.
Coinbase serves a dual purpose. It is, both, an exchange and a crypto wallet. In this article, you learn about the difference between the two, and how Coinbase keeps users digital currency and data secure.
What is Coinbase?
Coinbase is a cryptocurrency brokerage service. Users can exchange United States Dollars (USD) for their choice of five cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), and Ethereum Classic (ETC) (and many more). Coinbase also owns Coinbase Pro (formerly known as GDAX).
You can buy cryptocurrency from Coinbase with credit cards, debit cards, bank accounts, and Paypal.
Once you buy cryptocurrency, it stores in your Coinbase Wallet. You can send currency from your Coinbase Wallet to another wallet or crypto exchange and withdraw the balance back into your USD bank account.
Since trading is limited to the above mentioned five cryptocurrencies, Coinbase serves as a launching point to secure your initial investment. You can leave your crypto in your wallet indefinitely if you don’t want to buy other coins. Or, you can send your crypto to a crypto wallet, to trade on larger exchanges.
NOTE ON COINBASE’S WALLET
Coinbase provides a wallet for the coins you buy on Coinbase. But, it is not a wallet that serves for trading or exchanging on other platforms.
Coinbase is as safe and secure as an American company gets
The company is required by law to adhere to the regulations surrounding financial, data, and money services at a state and federal level.
Coinbase is a FinCEN registered Money Services Business and complies with the Bank Security Act. Also, they comply with all money transmission laws in California.
When it comes to security assurance, Coinbase is as trustworthy and secure as any other online service in the United States.
On top of that, Coinbase has backing from reputable investors, such as the Co-Founder of Reddit and the Bank of Tokyo.
How Does Coinbase Keeps Your Funds Defended?
Financial crashes and recessions are a result of the combination of savings and loan banking and investment banking. Unlike commercial banks, Coinbase keeps your crypto funds away from the companies business and operational funds. None of the money you hold on Coinbase gets used for anything.
Coinbase holds your digital currencies in a custodial bank account which, neither, Coinbase or its creditors can touch.
Less than two percent of users cryptocurrency data is stored online. The rest is backed up on offline servers and hard drives, securely held in safety deposit boxes around the world. And, the small percentage of currencies that are stored online, customers' funds are insured through a Lloyds of London syndicate.
In the event of a catastrophic system failure or security breach, United States citizen users of Coinbase are insured up to $250,000 through the FDIC. But, if an individual Coinbase account or wallet is compromised, you are liable for your own financial loss.
If you're an advanced user, you should get a secure crypto wallet like the Ledger Nano X or use an offline cold-storage wallet instead of using Coinbase.
Coinbase Personal Account Security
The first line of defense that Coinbase uses to ensure your account safety is your password. It is up to you to use a strong password that won't be easily forged. Use a random character generator tool, write it down somewhere protected, and store your password with LastPass.
Coinbase provides two-factor authentication methods to further secure your account. Google Authenticator is the most secure two-factor authentication method for Android devices. Just download the Google Authenticator app and Coinbase will require a six-digit code from your smartphone or tablet.
How to Keep Your Coinbase Crypto Safe
No Coinbase customer service representative or staff member will, ever, ask for your Coinbase password or two-factor authentication code. Keep your password secure and make it hard to guess. And, never sign onto your account from an insecure public Wi-fi network.
Make sure that you contact Coinbase from its official website. Third-party websites can scam users into divulging their Coinbase account information by changing the contact method.
It is a great idea to change your Coinbase password every three or four months. And, always keep a hard-copy of your Coinbase password off of an electronic platform in case you have to prove ownership of your account.
If you suspect that your account has been breached, check the IP address activity from your Coinbase accounts security settings menu. If any devices have logged onto your account that you don't recognize, contact Coinbase Customer Service immediately.
Always take extra steps to keep your exchange accounts secure when you use Coinbase or any other exchange.
A hardware wallet is the most secure way of keeping your cryptocurrency safe - try your best to hold your private keys. That being said, to date, Coinbase nor Coinbase Pro, have encountered any security breaches so, for all intents and purposes, Coinbase is as safe a platform as any on the market to buy, sell, and trade cryptocurrency.
If you already use Coinbase, make sure to learn how to save on some cash with our ultimate guide to Coinbase fees.