Is Coinbase Safe & Trustworthy in 2024? (Detailed Review)
Coinbase’s size and liquidity have made it one of the most durable crypto exchanges. However, In July 2024, many fear Coinbase is not a safe haven for customers. Here’s what to know!
Just because it’s the biggest U.S. exchange doesn’t mean Coinbase is safe to use!
Coinbase takes extensive security measures to keep customer accounts and cryptocurrency investments safe. Nonetheless, many customers have faced unauthorized account access.
Plus, many users also complain about technical glitches, poor customer support, and service outages. And that’s on top of Coinbase’s ongoing issues with lawsuits and government regulators.
No wonder so many are asking, “Is Coinbase really safe?”
Introduction
Overview
Coinbase is the largest crypto exchange in the U.S. and is used by millions of cryptocurrency traders. But with the sudden collapse of FTX, which was the largest crypto exchange in the world, many have turned a suspicious eye toward Coinbase.
Background
Customers use Coinbase to buy Bitcoin, Ethereum, Solana, and over 120 other different types of cryptocurrencies. During the fourth quarter of 2023, the company saw its revenues rise 41% quarter over quarter to $954 million, while the stock price jumped close to a two-year high.
While that’s good news for the platform, alarming issues have popped up recently, too: It’s facing significant obstacles in the form of hostile regulators (including the U.S. Securities and Exchange Commission (SEC), which sued the company), lawsuits, data breaches, disgruntled customers, and technical glitches.
With all these developments, many customers are concerned about whether or not their investments are secure with Coinbase.
Regulatory compliance
Perhaps most worrying is how Coinbase keeps finding itself in hot water with government regulators.
UPDATE: On Wednesday, March 27th the U.S. SEC scored a big win against Coinbase. A judge ruled that the SEC’s claim that Coinbase has engaged in the sale of unregistered securities could be heard by a jury at trial.
Coinbase was also levied a $50 million fine to settle allegations from New York regulators. The regulators found Coinbase broke the law by not doing enough to prevent money laundering on its platform.
“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth, ” said Adrienne A. Harris, New York’s Superintendent of Financial Services. “That failure exposed the Coinbase platform to potential criminal activity, requiring the Department to take immediate action.”
“I’ve always hated this platform because of it’s poor design and extremely expensive fees. Most recently I clicked on a button that said 'sell now' expecting to see what my Bitcoin would sell for and of course having me confirm before anything was done, but lickity split, my Bitcoin was sold for whatever they were willing to give me. As a web developer for over 20 years it was shocking to see what little care they take for their customers.”
Let’s examine some of the problems customers have faced at Coinbase…
Technical issues
Coinbase has also suffered from many technical issues, including slow loading times, long outage periods, transaction delays, and server errors. Many of these have occurred during periods of high volatility, which can be especially painful for investors looking to make moves during these turbulent periods.
How have some of these issues and how they’ve impacted Coinbase customers…
Account security
For any crypto exchange, security is key. Many Coinbase customers are concerned about the potential for unauthorized access, especially in light of recently reported security breaches. For example, in 2021, hackers stole crypto assets and user information from at least 6,000 Coinbase customers.
Some examples
One scary incident occurred when Coinbase allegedly exposed a customer’s personal information and login credentials.
Ryan Dellone alleged that Coinbase failed to protect his personal information and failed to use the information it had gathered on him and his interactions with the Coinbase system to detect obviously fraudulent attempts to gain access to his account…
Hackers broke into the account in December 2021, converted all of his assets into Bitcoin, and transferred the bitcoin into their Coinbase accounts, according to a complaint filed Tuesday.
A different customer said he lost $35,000 over four minutes despite completing the site’s required security steps. He claimed Coinbase did not respond to queries in a timely manner. The customer claimed Coinbase’s solution was to send him a mere $200 credit.
Another user claimed they lost over $168,000 and said the exchange’s customer service was of no help.
Painful glitch
In February 2024, Coinbase suffered a glitch that left many users with a zero balance in their accounts.
It occurred during a +10% Bitcoin price pump, frustrating many customers.
Server crashes
System crashes have also been an issue for Coinbase. When the company ran a Super Bowl ad, it generated 20 million hits, temporarily crashing the site.
Another time, Coinbase went down during a big pump day for Bitcoin.
Coinbase status page
The Coinbase status page is used to communicate any issues with their products, including planned and unplanned outages.
According to the Coinbase Status page, the Coinbase exchange experiences an outage issue nearly every single day.
Delayed transactions
There have also been reports of delays in completing transactions at Coinbase.
“Our nodes may lose sync with the rest of the network for short periods, which can cause transactions to remain pending longer than normal. Usually the delay is under an hour and the transaction will eventually go through normally.”
In the past, the company also reported delays in deposits and withdrawals on its Stellar platform.
Another time, Coinbase stopped transactions for U.S. users for over five hours due to an issue preventing the company from processing withdrawals or deposits involving bank accounts:
“We are currently unable to take payments or make withdrawals involving U.S. bank accounts. Our team is aware of this issue and is working on getting everything back to normal as soon as possible.”
Account closures
Also, Coinbase customers have frequently complained on Reddit about unexplained account closures and stalled withdrawal requests. Over the past week, a rising number of Coinbase customers have complained on the exchange’s Reddit forum about their accounts being closed without any explanation.
Many of these complaints include quotes from Coinbase that refuse to divulge the justification behind the closures, in some cases citing “a variety of factors, ” all of which go unexplained due to “security reasons.”
Coinbase’s explanations are lackluster.
For example, the company has prevented individuals from converting their assets to fiat cash, stating that “we can no longer continue our banking relationship.”
Pressed for details, Coinbase responded that it was “unable to elaborate on our process for this.” No wonder customers wind up peeved.
That means it is at the whim of outside vendors who provide data processing, security maintenance, and cloud storage solutions.
Outsourcing like this creates additional risks since any third-party vulnerabilities could wind up compromising Coinbase.
Private keys are one example of this.
Since Coinbase is a custodial exchange, it holds customers' private keys on their behalf. Many customers are understandably concerned about trusting a third party to keep their private keys and assets safe.
Withdrawing funds
There have also been customer complaints about withdrawing funds from Coinbase. Here’s an example:
“Now market goes up I am trying to sell my crypto, Coinbase makes it so hard for me to withdraw my money they start verifying my ID, my address .etc. and lock my account for verification. Not sure why they did not verify customers account at beginning? Is this the easy way to steal customer’s money? who should we report them to? The calls drop when you try to call them, emails bounce back, automatic chat that does not help anything. This website is untruthful and useless.”
Customer support
Frozen accounts
Several customers have reported frozen accounts or restrictions imposed due to hazy compliance measures. Customers are often unsure why any of it is happening, too.
Many users have reported issues with frozen or suspended accounts without any explanation from the company and zero ability to receive personalized responses.
Customers regularly complain about this on Twitter, Trustpilot, and forums like Reddit.
The platform offers no reliable live chat feature besides a bot that offers only limited capabilities.
Long wait times for support
According to many dissatisfied customers, getting help from Coinbase requires extensive time and effort.
Former Coinbase employees have even admitted that the support department struggles to keep up with demand. In fact, customers often wait days before getting a response.
So it’s not shocking that journalists have found thousands of customer complaints against the company. One major sticking point has been a pattern of account takeovers that steal funds, followed by ineffective customer service (usually offered only via email) from Coinbase.
Many customers report difficulty with this communication and some claim they still have not been made whole for their losses.
Add in legal fees, and you can see why customers are frustrated. “Most people who contact me would tell you it’s poor customer service,” said David Silver, an attorney focused on cryptocurrency.
“They’re being almost victimized twice. Because they themselves have almost no ability to contact Coinbase and deal with them directly, they’re forced to retain professionals.”
“Pattern of complaints”
The Better Business Bureau determined that Coinbase has a “pattern of complaints from customers who state they are locked out of their accounts, even after providing required information or updates.”
The BBB received 1,128 complaints about Coinbase over three years.
“I’ve been waiting for over five months for Coinbase to unlock my account and allow me to access my funds. I’ve never experienced or even heard of such a long wait time for action to be taken on an open customer support ticket and I honestly have no idea how to proceed.”
“I’ve been trying to connect my bank [account] so I don’t keep having to do wire transfers… It’s costing me lots of money and…I have got at least 3 tickets total. They just keep giving me the run around and closing unresolved tickets!”
And Coinbase’s iffy support has also been a topic of discussion on Quora.
As Coinbase grew, projects started to feel overstaffed, and the decision-making process slowed amid layers of bureaucracy, according to five people familiar with the company. Longtime employees were concerned that new hires felt “rudderless,” one person said, and joked that you could tell the length of someone’s tenure at Coinbase by the number of times the new recruits came to them asking for help.
That said, Coinbase has acknowledged these issues and has been working to improve its customer support by hiring additional support staff and improving its support systems.
Will it truly make a difference? Only time will tell.
Coinbase Global Inc. says it’s not responsible for losses stemming from a security breach, according to an account holder who sued in an attempt to recover $96,000 that he says was stolen from him. Jared Ferguson of Staten Island, New York, claims he received a text from his mobile carrier in May describing a SIM card change request that he hadn’t made. When he restored service to his iPhone the next day with a new card, Ferguson said he learned that almost his entire life savings was gone from his Coinbase account.
Scams
There have been reports of sophisticated Coinbase phishing scams. The goal is usually to gain access to and drain accounts. Some of the most common scams at Coinbase:
Phishing scams
Fraudulent emails, websites, or messages that imitate Coinbase’s official communication to trick users into revealing their login credentials or other sensitive information.
Impersonation scams
Scammers typically create fake social media profiles or websites that closely resemble Coinbase’s official channels, such as “CoinbaseUS.” Then, they use these platforms to impersonate Coinbase support and trick users into providing account details or making fraudulent transactions.
Fake Coinbase apps
Some scams involve the creation of fake mobile apps that mimic the Coinbase app. Users might unknowingly download these apps, giving scammers access to their account credentials and sensitive information.
Investment scams
Scammers might promote fake investment opportunities or schemes, claiming to be affiliated with Coinbase.
Tech support scams
Scammers will contact users posing as Coinbase support agents and claim an issue with the user’s account. They may request remote access to the user’s computer or ask for payment to resolve the issue.
Giveaway scams
Fake giveaways or promotions that claim to be sponsored by Coinbase are common. Scammers may ask users to send cryptocurrency to a specified address in exchange for larger returns, which never materialize.
Fees and limits
Coinbase has also been confusing re: fees and policies. One could argue these aren’t directly related to security. But if customers can’t trust Coinbase to be transparent with fees, how much can they trust the platform to keep their accounts safe?
Transaction fees
Coinbase customers frequently seem confused by changes at the company too. This Reddit thread featured Coinbase customers wondering why network fees changed so drastically there.
I’ve been using Coinbase to send and receive BTC for about 10 years. Never had a problem until a month ago when I sent $100 of BTC. It was confirmed $96 sent. I received $71. A few days later I sent $100. It was confirmed and I never received it. Today I sent $100. It showed $94 sent and I only received $71 again. What am I missing here besides my money? I’ve done this same transaction literally over 200 times and have never had money not show up or not received what was sent.
“I recently had a terrible experience with excessive fees charged by Coinbase that I wanted to share as a warning to others. I converted around $40,000 USDC to bitcoin on Coinbase. However, the resulting Bitcoin was only worth around $39,200 — meaning Coinbase charged me about $800 in fees (about 3% fee rate for one single transaction)! The fee amount was exorbitant and not disclosed to me ahead of time. I thoroughly reviewed Coinbase’s trading records and could not find any details on the specific fees for my transaction. As a customer, I have a right to know exactly what fees I’m being charged. The lack of transparency around fees is completely unacceptable.”
Coinbase has a lot of fees that can eat into any money you’re making, especially if you trade regularly or with significant amounts of cash. There are alternatives to the platform that provide strong returns without debilitating commission rates.
Confusing policies
The company has also come under fire for its unclear policies.
According to an SEC complaint, Coinbase made billions of dollars unlawfully facilitating the buying and selling of crypto asset securities. The SEC alleges that Coinbase intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the Commission as required by law.
In 2021, the Commodity Futures Trading Commission issued an order against Coinbase for:
“Reckless false, misleading, or inaccurate reporting as well as wash trading by a former employee on Coinbase’s GDAX platform.”
The order required Coinbase to pay a civil monetary penalty of $6.5 million and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations.
“Reporting false, misleading, or inaccurate transaction information undermines the integrity of digital asset pricing, ” said Acting Director of Enforcement Vincent McGonagle at the time.
Confusion also surrounded Coinbase’s entry into the marketing of cryptocurrency futures.
Following the recent announcement of Coinbase’s entry into cryptocurrency futures marketing, rumors have emerged that the company might employ this technology for “front-running” investors.
This concern stems from Coinbase’s existing utilization of such technology not only to enhance corporate revenue but also as a provider of futures contracts.
Coinbase’s Garrett Balliett tried to put out the fire with this explanation:
“We offer derivatives and futures products to our clients and institutional as well, particularly institutional clients that do provide those services. But it’s somewhat conflated because that isn’t also the same as us actually taking out those positions ourselves. But while we may be opening and closing positions for customers, we aren’t actually taking out the original position for a Coinbase.”
There are arguably too many question marks around Coinbase’s Ethereum staking. It’s a potentially significant moneymaking project, but regulators have to pin down their approach to this stuff to make it an investable quality.
Bankruptcy fears
There’s also concern about what would happen if the company were to file for bankruptcy. In its quarterly report, Coinbase added a risk disclosure:
If the company were to file for bankruptcy, the court might treat customer assets that the exchange is custodian for — their Bitcoin, Dogecoin or whatever — as Coinbase’s assets. And they’d be at the back of the line for repayment, forcing normal people, unaccustomed to the ins and outs of federal bankruptcy court, to claw back their money along with everybody else owed money by the exchange.
Adam Levitin, a Georgetown University law professor who studies bankruptcy, examined this scenario and wrote:
“So what happens to a customer if an exchange files for bankruptcy? I think it ends very badly for the customers.”
Basically, customers would be last in line to recover their money. In fact, they may wind up receiving only pennies on the dollar.
Conclusion
Customers are rightfully concerned with safety at Coinbase — just look at all the ongoing scams, spiteful reviews, and technical outages (often at times of peak volume) going on there.
Given all the above, it’s no surprise that some have decided to seek out platforms which feel more secure. Here’s one longtime customer explaining why they’re leaving Coinbase:
“I have been a long time customer of Coinbase for about 4 years and have put over $125,000 dollars into crypto using the platform. This platform is trash and I will never invest with them again… Goodluck talking to their customer service or getting them to help you with anything they will just continue to have you security lock you account out, and tell you if you want them to help you then make a new account with the new number???? from this point on I will be contacting my attorney because this scam platform is stealing my money!!!”
The Crypto.com wallet provides private keys encrypted locally on a user’s device.
At Coinbase, the trading account does not allow you to manage your private keys — however, the platform’s stand-alone wallet does (and you can have the keys on your device).
Bitcoin is a bearer asset, meaning you can hold the private keys to your Bitcoin in a personal Bitcoin wallet of your choosing.
If you personally don’t control the private keys associated with your Bitcoin, then you don’t actually hold your own Bitcoin.
In other words, if an exchange or a bank is holding your Bitcoin on your behalf, you are not in direct control of your Bitcoin. You are outsourcing the security of your Bitcoin to another party.
Coinbase and altcoins
Companies that don’t platform altcoins may have an advantage over Coinbase since it incurs large costs (legal and otherwise) by depending so much on altcoins as a revenue source.
In fact, Coinbase pays users to watch videos about how various kinds of crypto work, including altcoins that were cited within an SEC lawsuit. Nonetheless, Coinbase is actively encouraging customers to engage in these risky investments.
Bitcoin ETFs arrive
The recent introduction of Bitcoin ETFs may take a toll on Coinbase too.
Not everyone sees these ETFs as bullish for [Coinbase’s] stock. While Coinbase will benefit from the growth of these products using its brokerage and custody services, ultra-cheap ETFs will challenge Coinbase’s expensive fees for low-value trades. Should inflows dwindle, more weight will be placed on new products launched in recent years that do not rely on trading fees. This shift also transpires in the backdrop of a landmark suit from the Securities and Exchange Commission (SEC) that challenges many aspects of Coinbase’s business.
Coinbase alternatives
As uncertainty surrounding Coinbase intensifies, more alternatives for buying Bitcoin are popping up.
Perhaps the best reason to consider moving to one of these platforms is because Coinbase supports many risky tokens (including some outright scams).
According to many experts, platforms that stay away from these tokens and focus exclusively on Bitcoin (i.e. a well-established, widely accepted digital asset in good standing with the U.S. government) are a safer bet in the long run.
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Matt Ruby
Matt Ruby is a seasoned content writer helping educate million worldwide about Bitcoin for Swan. Matt work with tech companies to create words, videos, and other content that makes them seem human. He specializes in taking boring/drab tech topics and making them interesting, educational, funny, and accessible to regular people.
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