Coinbase is fast becoming a household name in the cryptocurrency world. As one of the leading cryptocurrency on-ramps, Coinbase is almost synonymous with the phrase “buy Bitcoin”. If you’re looking to buy Bitcoin or any other cryptocurrency for the first time, then here’s everything you need to know before handing over your bank account details to Coinbase.
Is Coinbase Safe?
There are several areas to consider before you can consider Coinbase “safe”. First, safety is a relative term. The acceptable risk threshold for you may be different from my risk threshold. Dan may be very risk-averse, whereas Gavin might be very risk-tolerant.
To answer this question, we’ll break it down into several categories. We’ll take a look at linking your bank account to Coinbase, storing cryptocurrencies on Coinbase, and some recent security scares.
Is It Safe to Link Your Bank Account to Coinbase?
When registering on Coinbase, you need to provide a payment method. This is how you will pay Coinbase for any cryptocurrencies you wish to buy. You’ll also need this should you sell any cryptocurrencies and want to cash out your funds.
For buying crypto, you can use a debit card or your bank account. It’s not possible to buy cryptos on Coinbase with a credit card, and even if it was, most credit card providers deny cryptocurrency purchases.
Once you’ve decided on your payment method, how do you know Coinbase won’t scam you? How can you be certain they won’t misappropriate your funds? Coinbase is a reputable exchange now. They operate out of San Francisco and are trusted by over 25 million users around the world. They used industry-standard security practices, and have an insurance policy, so should they lose your funds, you remain protected.
Your connection to your Coinbase account is secure thanks to two-factor authentication (2FA), along with SHA-256 RSA Encryption—the same kind of encryption your bank’s website uses.
Your primary concern with Coinbase is their compliance with legal authority data requests. As Coinbase operates within the respective laws in every country they trade in, they must and do follow government information requests.
Coinbase provide data such as your name and address, along with cryptocurrency purchases to governments who ask. Most of the time, this isn’t a problem for the law-abiding citizen. Pay your taxes on Bitcoin or other cryptocurrency gains and you won’t need to worry.
How Safe Is the Coinbase Wallet?
The Coinbase wallet is where Coinbase stores cryptocurrencies on your behalf. As with any exchange, you are not in control of this. Should Coinbase decide to blacklist you as a customer, suffer a massive hack or otherwise mismanage their funds, you can do nothing to protect your coins.
Coinbase’s insurance policy may help you out here, but storing coins on Coinbase (or any exchange) is a risky business. You only have to look at some of the worst crypto hacks in history to see how things can go wrong.
To mitigate this risk, move any cryptocurrency purchases off Coinbase and into cold storage as soon as possible. We recommend the Ledger Nano S. It’s a cheap and secure way to store your cryptocurrencies.
We’re not saying Coinbase is insecure, in fact, it’s more secure than many smaller exchanges, but if you don’t own your private keys, you are at the mercy of someone else who does.
Has Coinbase Suffered Any Security Breaches?
Coinbase has fared very well with cryptocurrency hacks or wrongdoings. While the few hacks it has suffered have been down to social engineering or phishing scams, it has not experienced any real disasters.
That said, it’s not been an easy ride for Coinbase. In March 2019, Twitter exploded with the #DeleteCoinbase movement. During this PR nightmare, Coinbase purchased a company with alleged links to oppressive government hacking groups. The good news is that due to the community outcry, Coinbase removed any employees who came from the acquired company and tightened up their due diligence processes.
Coinbase Customer Service
Should the worst happen, and you’re frozen out of your Coinbase account or worse, can the Coinbase support team help you out? Are they knowledgable and empowered to assist you, or are their virtual hands tied with strict limitations on how they can help?
As I recently discovered in my exchange account recovery article, Coinbase support is excellent. As I discuss in-depth, if you get locked out of your account, or otherwise suffer any problems, Coinbase support is there to help. While my experience with them was slow compared to some competing exchanges, a resolution of two to three days is excellent for any problems.
Again, as we mentioned above. If you don’t store your coins on Coinbase, you won’t have any worries about their support.
Is Coinbase Secure?
In our opinion, Coinbase is one of the most secure exchanges and on-ramp services around. They take adequate steps to verify your identity, follow industry standard best practices for security, and continue to invest in their systems, staff, and infrastructure to ensure the best possible user experience for you.
While Coinbase’s decentralised design means you should be cautious around using them as a long-term cryptocurrency storage solution, and their legal compliance record is not great for anonymous cryptocurrency advocates, you are unlikely to experience any serious problems as a legal cryptocurrency user.
Now go read Gavin’s guide on how to buy your first cryptocurrency on Coinbase.