Is Coinbase Safe & Trustworthy in 2024?

If you’re wondering “Is Coinbase safe?”, it’s a fair question. With so many crypto exchanges out there, safety can be a big concern. Coinbase, one of the most popular platforms, uses a bunch of security features like 2FA, cold storage for most funds, and insurance for online wallets, which should help ease worries. 

But still, you might wonder, “Has Coinbase been hacked?” or “Is Coinbase a scam exchange” After all, like other exchanges, Coinbase has had its share of hacks and technical issues over the years. Let’s break down what Coinbase offers in security and whether it’s safe enough for you.

Key Takeaways

• Coinbase is a safe crypto exchange due to security measures like two-factor authentication, cold storage, biometric verification, data encryption, and insurance for hot wallets.
• The Coinbase exchange has faced two security incidents, including a 2021 hack affecting over 6,000 users and a 2023 attempt by the Octopus hacker group.
• The Coinbase app frequently experiences technical issues, such as server crashes during high-traffic times, delays in transactions, and occasional account freezes (as reported by users on Reddit, Quora, and Trustpilot).

About Coinbase

Coinbase started back in 2012 and has since become one of the most popular platforms for buying and trading cryptocurrency. Originally, it was based in San Francisco, but now it operates without a central headquarters. You’ll find over 240 different cryptocurrencies to choose from including BTC and ETH.

For beginners, there’s Coinbase Simple – a super easy way to start trading, though it has higher fees. If you’re a more experienced trader, you might like Coinbase Advanced, which gives you lower fees and more advanced tools to understand and track the market better.

You’ll need to complete some verification steps to use Coinbase fully because it follows U.S. regulations. Once you’re set-up, you can add funds to your account in many ways – through bank transfers, debit cards, or even PayPal, which makes it easy if you’re in the U.S. or abroad. You can also withdraw funds using similar methods or by transferring to a crypto wallet.

On top of that, Coinbase has put a lot of emphasis on security; they use two-factor authentication, hold funds in cold storage (keeping them offline for extra safety), and even have insurance to cover certain losses.

Coinbase also stands out with its “Earn” program, where you can get a bit of crypto for free by learning about different coins. 

For those interested in holding crypto longer-term, they offer staking rewards on certain assets, which is a nice way to earn some extra value. Their Coinbase Wallet, which is self-custodial, gives you control over your own crypto, and you can use it to engage with decentralized finance, buy or sell NFTs, or even explore other exchanges. While the fees can be a little higher than some other platforms, a lot of people feel it’s worth it because of how simple and secure it is.

How Safe is Coinbase Exchange?

Coinbase has built a strong reputation in the crypto space, mainly because it takes user security and regulatory compliance so seriously. When you’re dealing with digital assets, having layers of protection matters, and Coinbase has several in place.

Robust Security Measures

• Two-Factor Authentication (2FA): Security starts at login with Coinbase. You’re required to set up 2FA to add a second verification step each time you sign in. This could be through SMS, email verification, or security keys. For even stronger protection, Coinbase offers its “Security Prompt” via the mobile app.
• Cold Storage for Most Funds: To keep your funds secure, Coinbase stores around 98% of user assets in offline cold storage. This reduces the risk of hacking because these assets aren’t connected to the internet.
• Biometric and Device Verification: With the Coinbase app, you can add another layer of security by enabling biometric access (like fingerprint or Face ID) on your device. Plus, if you log in from a new device, Coinbase will prompt you to verify it.
• Data Encryption: All your data and transactions on Coinbase are encrypted using industry-standard AES-256 encryption, along with TLS to protect your web traffic.
• Insurance Coverage for Hot Wallets: Only a small percentage of Coinbase’s assets are stored online, in what’s known as “hot wallets”. These are insured to protect against theft, which offers a safety net if Coinbase itself were hacked. Just note, though, that this insurance doesn’t cover things like phishing attacks on your personal account, so you’ll still need to be cautious.
• Around-the-Clock Monitoring and Security Audits: Coinbase has a dedicated team that monitors accounts for suspicious activity 24/7.

Regulatory Compliance

In addition to its strong security, Coinbase adheres to a range of regulations worldwide.

1. United States: Coinbase holds a BitLicense in New York, one of the toughest crypto licenses in the U.S. They’re also a registered Money Services Business (MSB) with FinCEN, which means they comply with strict federal anti-money laundering (AML) regulations.
2. European Union: Coinbase has an e-money license from the Central Bank of Ireland. If you’re in the EU, this means Coinbase is legally compliant with EU regulations.
3. United Kingdom: In the UK, Coinbase is regulated by the Financial Conduct Authority (FCA) and complies with AML laws. It is also among the best crypto exchanges in the UK.
4. Canada: In Canada, Coinbase is registered as an MSB with FINTRAC. This makes sure that Coinbase is complying with Canadian AML laws, helping to keep your transactions secure from illicit activities.
5. Australia: Coinbase holds a license from AUSTRAC in Australia, which mandates compliance with anti-money laundering and counter-terrorism financing laws. It is also among the top Australian crypto trading platforms.

Coinbase Security Incidents and Hacks

Coinbase has had a rough history with security breaches that have left many users frustrated and wary. 

Read this: over 6,000 users saw their funds stolen after hackers exploited a loophole in Coinbase’s SMS-based two-factor authentication (2FA). It wasn’t even a simple hack – these attackers needed to gain access to users’ personal emails, which they got through phishing scams. With those, they bypassed the 2FA security layer by getting the SMS codes directly through a flaw in Coinbase’s system and getting remote access to user accounts. And this was a major flaw because it was exactly the type of vulnerability users expect big exchanges to protect against.

Coinbase patched it after the fact, but only once the damage was done. For those who lost money, Coinbase promised reimbursement, but that didn’t calm everyone’s worries. Some users even reported that getting proper support or answers from Coinbase was nearly impossible at times, a complaint that’s echoed by many in the crypto community.

Coinbase has kept trying to beef up security, but not without more bumps along the way. In February 2023, another hacker group, Octopus, managed to get in. But this time user funds were safe.

Coinbase also recently faced complaints around “Account Recovery” failures where hackers could easily intercept codes. This led some to wonder if they should stop trusting Coinbase with their crypto assets.

Coinbase Technical Issues (Reported by Real Users)

Coinbase users are no strangers to technical issues, especially when cryptocurrency prices soar. 

“Recurring server crashes”

This is one of the most notorious problems. Whenever Bitcoin sees a price surge, there’s a good chance Coinbase will crash, leaving users frustrated. The platform has a history of failing to handle high traffic – like in early 2024 when Bitcoin’s price hike to $67,000 crashed the exchange, leaving users staring at zero balances in their accounts.

These issues often come just as users need to buy, sell, or check balances, making the timing particularly annoying. You’d think a company as big as Coinbase would be prepared for such traffic, but these outages are almost expected by now.

Transaction delays

Transaction delays are another headache. Users regularly report that deposits or withdrawals can take hours, sometimes longer. The platform had an incident in 2022 where U.S. customers were locked out of transactions for over five hours. 

Account closures and frozen assets

Then there are the issues with account closures and frozen assets. People have shared their experiences on forums like Reddit, detailing accounts closed without warning or explanation. Imagine logging in, only to find out that your account has been locked, with no clear way to access your money. 

Even worse, the customer support service team often provides little to no assistance. There are numerous stories of customers reaching out to Coinbase support, only to receive generic responses or none at all. The frustration here isn’t just the technical issues; it’s the lack of support and transparency that leaves users feeling helpless.

Coinbase’s response to these problems is usually the same: “a brief statement acknowledging the issue and a promise that their engineers are working on it”.

But for the users, these promises sound hollow, especially when the same issues keep happening during every bull market cycle. The recent outages in 2024 (during the Super Bowl ad) alone have caused uproar on social media, with people expressing disbelief that Coinbase still cannot manage its traffic. 

These issues aren’t new or isolated; they’re an ongoing struggle that, frankly, makes Coinbase hard to rely on in crucial moments. The issues extend beyond just server crashes; they affect users’ confidence, making them question whether Coinbase is worth the risk during high-stakes trading.

How to Secure Your Coinbase Account?

To secure your Coinbase account:

• Start with a strong, unique password and login credentials. Combine letters, numbers, and symbols, and avoid reusing them across sites. Updating it regularly helps keep it secure from breaches.
• Enable two-factor authentication (2FA), but avoid SMS-based options due to SIM-swap risks. Choose Google Authenticator or a hardware key like YubiKey, as they’re more secure and difficult to bypass.
• For larger amounts, consider the Coinbase Vault, which adds multiple verification steps for withdrawals, keeping your funds safer.
• Always keep your Coinbase app updated. New updates often contain security fixes to protect you from newly discovered threats.
• Stay vigilant for phishing emails. Verify email sources before clicking links or providing any information; Coinbase will never ask for your password or 2FA code.
• Only send funds to known, trusted crypto wallets or addresses. Once funds are sent, reversing the transaction is typically impossible.
• Never share your login details, including your password or 2FA code, even with Coinbase support. Scammers often impersonate support to steal this information.
• Also, routinely review your account for unknown device logins and delete unfamiliar devices. These steps provide strong layers of protection to help secure your account.

Is Coinbase Wallet Safe?

Coinbase Wallet is generally safe due to its “self-custody” nature. So, you’re in control of your assets and your private keys. This means Coinbase itself can’t access or recover your funds for you if anything goes wrong. 

Instead of depending on a third party, you’re responsible for securing the wallet, using something called a recovery phrase or seed phrase. So, keeping this recovery phrase secure (written down, stored offline) is critical. If someone else gets a hold of it, they could access your funds, so it’s recommended to use encrypted backups for additional protection if needed.

Coinbase Wallet also has additional security features, such as support for biometric locks and a PIN to prevent unwanted access on mobile devices. The wallet can be set to auto-lock after a period of inactivity, and you can choose to manually lock it, just like you’d do with your phone. This locking feature means that even if you step away, your wallet’s contents remain protected. 

They’ve also implemented Multi-Party Computation (MPC) technology, which adds another layer of safety for your private keys by splitting key information. This ensures sensitive details aren’t stored in one place.

Since Coinbase Wallet is a non-custodial wallet, it’s separate from the main Coinbase app where you might buy or sell crypto. 

With the Wallet app, you’ll be able to store thousands of different tokens across multiple blockchains (Ethereum, Base, Polygon, Avalanche, etc.), while keeping full control of your private keys. And, because Coinbase Wallet has its own web browser extension, you can access your funds on both desktop and mobile, which adds convenience.

Conclusion: Is Coinbase Legit?

If you’re wondering “Is Coinbase safe and legit?”, the answer is generally yes, but with some caution. Coinbase provides several protective features, such as two-factor authentication, cold storage for most assets, biometric verification, and insurance for hot wallets. 

These measures make it a secure choice for many. However, past security flaws, including vulnerabilities in SMS-based 2FA, have caused some users to lose funds. 

Coinbase continues to strengthen its security protocols, yet technical issues and occasional account problems still worry some. Hence, while it is reliable for most, users should stay cautious and take extra steps to secure their Coinbase accounts.

FAQs

Is Coinbase safer than Binance?

Coinbase and Binance are popular, trusted crypto exchanges, each with strong security, yet their approaches differ. Coinbase is the U.S.-based largest crypto exchange and follows strict regulations, which some users feel adds trust and protection. It requires verification, uses two-factor authentication, and stores 98% of funds offline in cold storage to minimize hacking risks. 

Binance also prioritizes security following similar measures but has faced regulatory issues in certain countries, raising questions about its safety for U.S. users. Coinbase insures its hot wallets, and Binance also has a $1 billion SAFU fund. So, while both are safe, Coinbase may have an edge in security due to compliance with users’ assets, specifically in the U.S.

What is the safest crypto exchange in the U.S.?

Coinbase ranks as one of the safest crypto exchanges in the U.S., mainly because it follows regulatory standards, including anti-money laundering laws. It holds licenses like New York’s BitLicense and is registered with FinCEN, which ensures transparency and legal oversight. Kraken and Crypto.com are also among the safest crypto trading platforms.

Is Coinbase safe for beginners?

Yes, Coinbase is a safe choice for beginners due to its easy-to-use interface, especially with its “Simple” trading option. The platform’s security feature includes two-factor authentication, biometric logins, and encrypted data, so beginners can start with confidence.