Coinbase is one of the most popular digital currency exchanges on the market for popular currencies such as Bitcoin and Ethereum. They serve millions of users in over 30 countries around the world, and promise an easy way for beginners in cryptocurrency to own a digital currency. A major question that comes to mind, however, is, is Coinbase safe?
In this article, we’ll talk about the company’s legitimacy, protection of funds and security measures.
Coinbase security measures
When it comes to security, there are three major aspects that always need to be discussed; account safety, fund security and company legitimacy.
The most straightforward aspect is account security, and Coinbase has mechanisms in place to prevent accounts from being compromised. These include:
- 2-factor authentication for user signup and login, ensuring that attempts at hacking someone’s account are minimized.
- Passwords hashed in database with a 12-cost factor
- Prevention against CSRF attacks and SQL injection
Coinbase also has a bug bounty program, where it pays developers and hackers to carry out tests on their application and try to hack, so they may be able to identify vulnerabilities and fix them accordingly.
Coinbase separates funds held by customers from company funds by using custodial bank accounts. These funds cannot be used by the company even if it goes bankrupt, in which case the funds are returnable to the users.
Furthermore, to ensure that digital currency is not stolen in a hack, 98% of the company’s cryptocurrency (user-owned) holdings are stored offline in digital wallets, which are then stored in vaults and safety deposit boxes distributed around the world.
The rest of the cryptocurrency that is online, is insured by a syndicate of Lloyd’s of London. Furthermore, US residents who use the company’s USD wallet are provided FDIC insurance against any losses, up to a maximum of $250,000.
Coinbase is compliant with US federal and state laws, since the company’s is headquartered in the country. This compliance includes:
- Compliance with the Bank Secrecy Act 1970
- Compliance with the USA Patriot Act 2001
- Registration as a Money Services Business with the bureau of Financial Crimes Enforcement Network (FinCEN)
Coinbase also claims to be compliant with all state money transmission laws and regulations, which means that customers can feel at ease, knowing that accountability is in place for the company, whose job it is to safeguard their funds and other digital assets.
When it comes to privacy and security of assets online, it is important to understand that there are multiple points of failure available. As such, it is the company’s responsibility as much as the user’s. Someone might use any number of ways to get to your credentials without even compromising the company’s database (a keylogger or virus installed on your computer, for instance). It is your responsibility to keep your account secure through two-factor authentication and regular monitoring of your account activity.
Stay safe, and good luck!