Is Coinbase Safe? A Comprehensive Security Review of the Platform

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 used for trading bitcoin and other digital currency.

Coinbase is a business operating out of San Francisco, 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. They are the most popular crypto exchanges in the world, and for a good reason.

Coinbase serves a dual purpose. It is, both, an exchange and a crypto wallet.

But does this compromise safety for Coinbase users?

In this article, you learn about the difference between the two, and how Coinbase keeps users' digital currency and data secure.

logo blank background from coinbase site

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).

Coinbase Pro is a cryptocurrency exchange that offers much more features.

And many different cryptocurrencies are supported on Coinbase Pro compared to the regular Coinbase platform. Crypto and other digital currency can be traded both on Coinbase and Coinbase Pro.

The regular Coinbase account is best for newbies because of how simple it is to use. However, the high cost of trading on Coinbase's standard platform may be overlooked by those who are new to crypto and looking for simplicity. We will get more into the fees later on in this article.

Compared to other exchanges, Coinbase allows users to buy cryptocurrencies fairly easily due to how simple the interface is.

Coinbase has varying levels of support for different cryptocurrencies.

Availability to buy, sell, deposit and withdraw supported cryptocurrency varies by crypto. Fees and availability also depend on your country as well as payment method you use!

Payment methods

You can buy cryptocurrency from Coinbase with credit cards, debit cards, bank accounts, and Paypal.

Payment Method

Fees

Coinbase Wallet

1.49%

US Bank Account

1.49%

Debit/credit card

3.99%

Instant card withdrawal

to 1.5% (minimum fee of $0.55)

ACH transfer

Free

Wire transfer

$10 ($25 outgoing)

Credit and debit purchases

You can purchase cryptocurrency with a credit card if your card supports "3D Secure." With this payment method, you will not have to pre-fund your account before purchasing it and the transactions are instantaneously processed so there's no waiting. If not, there is a waiting period for most debit card and credit card purchases.

Credit and debit card purchases on Coinbase generally have very low limits compared to ACH transfers.

Bank account transfers

ACH transfers can go up to $25,000 a day for verifiend Coinbase accounts. These limits are pretty large compared to other crypto exchanges.

If you want to buy and sell with higher transaction limits, then using a bank account is the way for you. Coinbase allows users to deposit funds or purchase assets so that your Coinbase transactions are processed immediately when used in conjunction with their services!

Additionally, using a bank account is much easier when you want to transfer money from Coinbase's service.

Luckily, Coinbase won't imit how much crypto you can sell to your Coinbase fiat wallet (USD, GBP, EUR). So you can transfer at will depending on the payment method that you are using to transfer.

Coinbase account

Once you buy cryptocurrency, it stores in your Coinbase accouint. You can send currency from your Coinbase Wallet to another wallet or crypto exchange and withdraw the balance back into your USD bank account. All of this can be done right from the Coinbase site.

Coinbase allows you to sell your crypto directly into a Coinbase fiat wallet. You can also withdraw the money from that account and buy more cryptocurrency on their platform if desired!

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 account 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 such as Coinbase Pro.

Coinbase also offers a debit card. With the Coinbase Card, you can spend your crypto anywhere debit cards are accepted and convert everything to U.S. dollars before completing a purchase or withdrawing cash at an ATM!

Plus, with this card it is easy to load funds onto the card in order for spending them right away - no need for worrying about selling cryptocurrency on exchanges first.

In an effort to streamline the process of cryptocurrency transactions, Coinbase has introduced ACH transfer. With this new feature you can seamlessly deposit crypto into your USD Coinbase wallet via bank account and transfer them out without any additional fees for a smooth transaction experience.

Coinbase Pro

When you place an order at the market price that gets filled immediately, there are two ways to be a maker.

You can offer liquidity by placing limit orders that get fulfilled right away (making sure not to go far over or below the current trading price).

Alternatively, if you want zero fee trades without being tied down by volume limits then utilize Maker Taker as it charges no commissions for people with enough in their account balance.

Coinbase Pro is a trading platform that allows traders to view 1-minute candle or line charts, and use overlays like the exponential moving average.

It offers 2 indicators at this time: EMA (12) and EMA (26). For crypto holders looking for serious trade tools, Coinbase Pro doesn’t have much going on in terms of indicators yet - but it does offer more than 100 pairs with USD worldwide as well as many different kinds of cryptocurrency available in 42 regions around the world. For most traders, that is more than enough

You can check out my full review comparing Coinbase to Coinbase Pro below:

Full Review: Coinbase vs Coinbase Pro

NOTE ON COINBASE’S WALLET: Coinbase provides a wallet and address for the coins you buy on Coinbase and trade. But, it does not work for trading or exchanging on other platforms. If you have a coinbase wallet, you are not able to use other crypto exchanges. You would need a hardware wallet in order to keep everything in one place and use multiple platforms. A different crypto exchange might work better if you are looking to exchange on multiple platforms with one wallet.

Coinbase and Coinbase Pro are some of the safest options

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 cryptocurrency exchange that has been leading the charge in establishing strong security measures. With 2-step verification, biometric fingerprint logins, and 98% of its funds stored offline you can feel confident your account will be secure with Coinbase!

Of course, with any digital currency, and entering payment methods online, nothing is 100% safe. But Coinbase users are confident that Coinbase is one of the most secure crypto platforms out there. Compared to other exchanges, they have evolved and survived with ever-changing laws and regulations.

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.

Coinbase is available to customers in the following regions/countries:

  • US
  • Canada
  • United Kingdom
  • Europe

For US residents, Coinbase offers USD wallets that are usable depending on which state you live in - some states require a money transmitter's license and others don't have any requirements at all yet.

You can learn more about the countries that can use Coinbase as a crypto exchange here: https://help.coinbase.com/en/coinbase/trading-and-funding/other/what-countries-and-us-states-are-supported-for-coinbase-and-the-usd-wallet

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. As one of the most popular bitcoin exchange platforms, Coinbase's platform offers many features, including an insurance policy.

Coinbase holds your digital currencies in a custodial bank account which, neither, Coinbase or its creditors can touch.

The Coinbase wallet is one of the safest ways to store your money. They safeguard almost 99% of their assets in a cold storage that can’t be hacked, and only have 1% available online for trading purposes. In case anything happens with those funds they are insured!

Less than one 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 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.

When you buy crypto for the first time, you are issued two keys: a public key and private key. The public address is like an email account that can be shared with anyone to send or receive funds while the private one is usually in a string of letters and numbers which should not be given out to anyone as it accesses your virtual vault holding all of your money.

As long as only the owner has their own personal password, they will have full control over their crypto finances anywhere in the world because no internet connection would be needed!


Security feature

Description

Coinbase

Coinbase Pro

2 Factor Authentication

Coinbase requires 2 factor authentication for login, withdrawal and transfers.

Yes

Yes

Cold storage

99% of assets held in physical cold storage, can't be hacked.

Yes

Yes

Pretty good privacy (PGP)

Coinbase provides a guide to setting up PGP encryption to secure communications.

Yes

Yes

Authenticator apps

Besides SMS, Coinbase also uses the Google Authenticator app.

Yes

Yes

Security keys

They store in your computer drive and generate a one-time passcode when you log into an account.

Yes

Yes

Insurance policy for Coinbase

For U.S. customers, Coinbase pools your balance with the balances of other customers and holds those funds in either:

USD custodial accounts at FDIC-insured banks; USD denominated money market funds; or invests them in liquid US Treasuries, all in accordance with state law for registered Money Service Businesses (MSBs).

Funds could be held as pooled custodial accounts at one or more insured banks so there is no need to worry that these investments will ever go under if any bank goes bankrupt because they're FDIC-insured!

To the extent, these investment options are held as cash dollars not subject to interest rates from inflationary pressures like what might happen when investing in stocks and bonds.

coinbase security logo on screen with cursor

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. They will ask for your phone number for extra verification during this process.

As discussed, Coinbase uses many payment methods. Sometimes, Coinbase will ask for photo ID verification. The benefits of ID verification include preventing fraud and keeping the community safe. It also adds an extra layer of protection by ensuring no one but you links your payment information like your bank account or credit/debit card to the site.

Because of this security feature you're account has 3 different verification levels. As you verify your identity, your limits increase.

Level

Requirements

Benefits

Level 1

Verify your phone number

$9,500 investment limit

Level 2

Verify personal info like address

Store USD, unlimited amount, can make wire transfers

Level 3

Verify ID

Receive and send currency

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.

Make sure your private keys are secure and you are the only person with access to your account.

You can also use hardware wallets to store your crypto for an additional security measure. Hardware wallets are the latest trend in crypto security.

The thumb drive-size device stores your private keys offline and makes it impossible for hackers to get them, even if they hack into your computer!

This feature is a great reason to buy one of these devices because you can keep all that juicy bitcoin safe from any prying eyes. However, their increased complexity means they're not as easy or cost-effective as software wallets...

The hardware wallet industry has really taken off recently with so many people scrambling around looking for ways to protect themselves against hacking attacks on personal accounts by unscrupulous individuals seeking access to sensitive financial information such as credit card numbers and social media passwords which have been stolen at an alarming rate over recent years - this might be why some prefer it to the traditional Coinbase account.

Think of it like using a debit card compared to cash.

Customer Support

Coinbase's customer support team is always on hand to answer your questions. You can chat with them through email, phone or their extensive FAQs section which has a wealth of information about how you use and maintain your account.

Unfortunately, they do not have a live chat feature on their site. However, the support team is always very responsive to emails. Coinbase's customer service also offers phone support but only for certain inquiries. Coinbase will never call and ask for your bank info, Coinbase password or any kind of payment methods.

Drawbacks

One of the things that sets Coinbase apart from other exchanges is their widespread coverage. The site currently allows you to buy and sell cryptocurrencies with a number of different currency pairs, and they also allow for deposits in national currencies like USD or GBP. One drawback when it comes to this exchange? A high fee structure—a major downside noted by users on Reddit: "I can understand why people would want an alternative."

Using Coinbase is definitely convenient, but some more experienced user might find

Coinbase fees

The Coinbase fees are one of the biggest drawbacks to Coinbase as a crypto exchange. Any kind of bitcoin exchange or crypto platform is going to charge users fees when trading.

If you are selling or buying with a U.S. bank account and the transaction amount is over $200 USD then an effective conversion fee of 1.4% applies to your transactions - but for smaller amounts like under $200, it will be 4%.

This rate varies from country to country so make sure you check what currency type your bank uses before making any international payments!

Cryptocurrency trading fees are calculated in two ways: as a flat fee or percentage of the 30-day trade volume. Coinbase is one of these platforms.

The tiered structure varies depending on how much you're trading and is different for each exchange, but many exchanges have adopted this type of pricing model to help users create an ideal trading plan that works best with their individual needs.

It's also possible to earn free bitcoin and other cryptocurrencies. Coinbase offers "Coinbasse Earn" which allows Coinbase users to watch videos to learn about cryptocurrency in exchange for crypto deposited directly into their Coinbaese wallet.

Free bitcoin is appealing to many new Coinbase users, especially if they are not yet informed about the digital trading world.

screen with trading pairs and candles on coinbase pro

Final Thoughts

A hardware wallet is the most secure way of keeping your bitcoin and other cryptocurrencies 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.

Coinbase is a very safe and reliable crypto exchange that accepts many different payment methods, so it’s no surprise that they are one of the biggest cryptocurrency exchanges.

They also offer their own wallet service for storing your Bitcoin or other cryptocurrencies you trade on Coinbase. If you want to get into trading bitcoin but don’t have any experience with cryptocurrencies, then sign up for Coinbase!

If you already use Coinbase, make sure to learn how to save on some cash with our ultimate guide to Coinbase fees.

About Crypto Ryan 50 Articles
Hi, I'm Ryan. I started investing in cryptocurrency in early 2014. Naturally, I want everyone to have the chance to learn about the crypto world so I created this blog! I hope my articles help you understand blockchain and cryptocurrency. Cheers!