Is Coinbase Safe & Trustworthy in 2024? (Detailed Review) (2024)

Industry

Coinbase’s size and liquidity have made itone ofthe most durable crypto exchanges. However, InJuly 2024, many fear Coinbase isnot asafe haven for customers. Here’s what toknow!

Just because it’s the biggest U.S. exchange doesn’t mean Coinbase issafe touse!

Coinbase takes extensive security measures tokeep customer accounts and cryptocurrency investmentssafe. Nonetheless, many customers have faced unauthorized account access.

Plus, many users also complain about technical glitches, poor customer support, and serviceoutages. And that’s ontop ofCoinbase’s ongoing issues with lawsuits and government regulators.

Nowonder somany are asking, “IsCoinbase really safe?”

Introduction

Overview

Coinbase isthe largest crypto exchange inthe U.S. and isused bymillions ofcryptocurrencytraders. But with the sudden collapse ofFTX, which was the largest crypto exchange inthe world, many have turned asuspicious eye towardCoinbase.

Background

Customers use Coinbase tobuy Bitcoin, Ethereum, Solana, and over 120 other different types ofcryptocurrencies. During the fourth quarter of2023, the company saw its revenuesrise41% quarter over quarter to$954 million, while the stock pricejumped close toatwo-year high.

While that’s good news for the platform,alarming issues have popped uprecently, too: It’s facing significant obstacles inthe form ofhostile 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 ornot their investments are secure withCoinbase.

Regulatory compliance

Perhaps most worrying ishow Coinbase keeps finding itself inhot water with government regulators.

UPDATE: OnWednesday, March 27th the U.S. SEC scored abig win against Coinbase. Ajudge ruled that the SEC’s claim that Coinbase has engaged inthe sale ofunregistered securities could beheard byajury attrial.

BACKGROUND: The U.S. SEC recentlylaunched amajor lawsuit against Coinbase, claiming itoperated asanillegal securities exchange, broker, and clearingagency.

Coinbase was also levied a$50 million fine tosettleallegationsfrom New Yorkregulators. The regulators found Coinbase broke the law bynot doing enough toprevent money laundering onitsplatform.

• “Coinbase failed tobuild and maintain afunctional compliance program that could keep pace with its growth, ” said AdrienneA. Harris, New York’s Superintendent ofFinancial Services. “That failure exposed the Coinbase platform topotential criminal activity, requiring the Department totake immediate action.”

Recently, the SEC hit crypto exchange Kraken with alawsuit,alleging that itwas operating asanunregistered exchange. Some fear this isasign ofatrend and that the SEC will continue topursue action against cryptoexchanges.

Check out our Kraken exchange review here!

Dissatisfied customers

Customer reviews reveal the disappointment felt bymany Coinbase customers:

• Coinbase gets 1.9 out of5 stars (from 9,350 reviews) atTrustpilot.

• 82% ofthese reviews received a1-star rating.

• Swan, onthe other hand boasts aTrustpilot rating of4.5.

• 78% ofcustomers rating their experience as5-stars.

Asample review ofCoinbase atTrustpilot:

• “I’ve always hated this platform because ofit’s poor design and extremely expensivefees. Most recently Iclicked onabutton that said 'sell now' expecting tosee what myBitcoin would sell for and ofcourse having meconfirm before anything was done, but lickity split, myBitcoin was sold for whatever they were willing togiveme. Asaweb developer for over 20 years itwas shocking tosee what little care they take for their customers.”

Let’s examine some ofthe problems customers have faced atCoinbase…

Technical issues

Coinbase has also suffered from many technical issues, including slow loading times, long outage periods, transaction delays, and servererrors. Many ofthese have occurred during periods ofhigh volatility, which can beespecially painful for investors looking tomake moves during these turbulent periods.

How have some ofthese issues and how they’ve impacted Coinbasecustomers…

Account security

For any crypto exchange, security iskey. Many Coinbase customers are concerned about the potential for unauthorized access, especially inlight ofrecently reported securitybreaches. For example, in2021, hackers stole crypto assets and user information from atleast 6,000 Coinbase customers.

Some examples

One scary incident occurred when Coinbase allegedly exposed acustomer’s personal information and login credentials.

This led tohackers stealing around $100,000 inassets, according toafederal lawsuit.

Ryan Dellone alleged that Coinbase failed toprotect his personal information and failed touse the information ithad gathered onhim and his interactions with the Coinbase system todetect obviously fraudulent attempts togain access tohis account…

Hackers broke into the account inDecember 2021, converted all ofhis assets into Bitcoin, and transferred the bitcoin into their Coinbase accounts, according toacomplaint filedTuesday.

Adifferent customer said helost $35,000 over four minutes despite completing the site’s required securitysteps. Heclaimed Coinbase did not respond toqueries inatimelymanner. The customer claimed Coinbase’s solution was tosend him amere $200 credit.

Another user claimed they lost over $168,000 and said the exchange’s customer service was ofnohelp.

Painful glitch

• InFebruary 2024, Coinbasesufferedaglitchthat left many users with azero balance intheir accounts.

• Itoccurred during a+10% Bitcoin price pump, frustrating manycustomers.

Server crashes

• System crashes have also been anissue forCoinbase. When the company ran aSuper Bowl ad, itgenerated 20 million hits, temporarily crashing the site.

• Another time, Coinbasewent downduring abig pump day for Bitcoin.

Coinbase status page

• TheCoinbase status pageisused tocommunicate any issues with their products, including planned and unplanned outages.

• According tothe Coinbase Status page, the Coinbase exchange experiences anoutage issue nearly every singleday.

Delayed transactions

There have also been reports ofdelays incompleting transactions atCoinbase.

The companyexplains:

• “Our nodes may lose sync with the rest ofthe network for short periods, which can cause transactions toremain pending longer thannormal. Usually the delay isunder anhour and the transaction will eventually gothrough normally.”

Inthe past, the company alsoreporteddelays indeposits and withdrawals onits Stellar platform.

Another time, Coinbasestopped transactionsfor U.S. users for over five hours due toanissue preventing the company from processing withdrawals ordeposits involving bank accounts:

• “Weare currently unable totake payments ormake withdrawals involving U.S. bankaccounts. Our team isaware ofthis issue and isworking ongetting everything back tonormal assoon aspossible.”

Account closures

Also, Coinbase customers have frequentlycomplainedonReddit about unexplained account closures and stalled withdrawalrequests. Over the past week, arising number ofCoinbase customers have complained onthe exchange’s Reddit forum about their accounts being closed without any explanation.

Many ofthese complaints include quotes from Coinbase that refuse todivulge the justification behind the closures, insome cases citing “avariety offactors, ” all ofwhich gounexplained due to“security reasons.”

Coinbase’s explanations are lackluster.

For example, the company has prevented individuals from converting their assets tofiat cash, stating that “wecan nolonger continue our banking relationship.”

Pressed for details, Coinbase responded that itwas “unable toelaborate onour process for this.” Nowonder customers wind uppeeved.

Third parties

Coinbase uses many third-party services toenable smooth operations.

• That means itisatthe whim ofoutside vendors who provide data processing, security maintenance, and cloud storage solutions.

• Outsourcing like this creates additional risks since any third-party vulnerabilities could wind upcompromisingCoinbase.

Private keys are one example ofthis.

Since Coinbase isacustodial exchange, itholds customers' private keys ontheirbehalf. Many customers are understandably concerned about trusting athird party tokeep their private keys and assetssafe.

Withdrawing funds

There have also been customer complaints about withdrawing funds from Coinbase. Here’s anexample:

• “Now market goes upIamtrying tosell mycrypto, Coinbase makes itsohard for metowithdraw mymoney they start verifying myID, myaddress .etc. and lock myaccount for verification. Not sure why they did not verify customers account atbeginning? Isthis the easy way tosteal customer’s money? who should wereport themto? The calls drop when you try tocall them, emails bounce back, automatic chat that does not helpanything. This website isuntruthful and useless.”

Customer support

Frozen accounts

Several customers have reported frozen accounts orrestrictions imposed due tohazy compliancemeasures. Customers are often unsure why any ofitishappening, too.

• Many users have reported issues with frozen orsuspended accounts without any explanation from the company and zero ability toreceive personalizedresponses.

• Customers regularly complain about this onTwitter, Trustpilot, and forums likeReddit.

• The platform offers noreliable live chat feature besides abot that offers only limited capabilities.

Long wait times for support

According tomany dissatisfied customers, getting help from Coinbase requires extensive time and effort.

Former Coinbase employees have even admitted that the support department struggles tokeep upwithdemand. Infact, customers often waitdaysbefore getting aresponse.

Soit’s not shocking that journalists have found thousands ofcustomer complaints against thecompany. One major sticking point has been apattern ofaccount takeovers that steal funds, followed byineffective 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 theirlosses.

Add inlegal fees, and you can see why customers are frustrated. “Most people who contact mewould tell you it’s poor customer service,” said David Silver, anattorney focused oncryptocurrency.

• “They’re being almost victimizedtwice. Because they themselves have almost noability tocontact Coinbase and deal with them directly, they’re forced toretain professionals.”

“Pattern ofcomplaints”

The Better Business Bureau determined that Coinbase has a“pattern ofcomplaints from customers who state they are locked out oftheir accounts, even after providing required information orupdates.”

The BBB received 1,128 complaints about Coinbase over threeyears.

Coinbase’s “disastrous” customer servicehas also come upfrequently ontech news site Hacker News. Here’s one example:

• “I’ve been waiting for over five months for Coinbase tounlock myaccount and allow metoaccess myfunds. I’ve never experienced oreven heard ofsuch along wait time for action tobetaken onanopen customer support ticket and Ihonestly have noidea how toproceed.”

You canfind similar statementsonReddittoo.

• “I’ve been trying toconnect mybank [account] soIdon’t keep having todowiretransfers… It’s costing melots ofmoney and…I have got atleast 3 ticketstotal. They just keep giving methe run around and closing unresolved tickets!”

And Coinbase’s iffy support has also been atopic ofdiscussiononQuora.

Why has poor support been anongoing issue?The rapid growth atCoinbase may betoblame:

• AsCoinbase grew, projects started tofeel overstaffed, and the decision-making process slowed amid layers ofbureaucracy, according tofive people familiar with thecompany. Longtime employees were concerned that new hires felt “rudderless,” one person said, and joked that you could tell the length ofsomeone’s tenure atCoinbase bythe number oftimes the new recruits came tothem asking forhelp.

That said, Coinbase has acknowledged these issues and has been working toimprove its customer support byhiring additional support staff and improving its support systems.

Will ittruly make adifference? Only time willtell.

Avoiding responsibility

Coinbase repeatedly avoids responsibility for security breaches.Details from one customer’s lawsuit:

• Coinbase Global Inc. says it’s not responsible for losses stemming from asecurity breach, according toanaccount holder who sued inanattempt torecover $96,000 that hesays was stolen fromhim. Jared Ferguson ofStaten Island, New York, claims hereceived atext from his mobile carrier inMay describing aSIM card change request that hehadn’tmade. When herestored service tohis iPhone the next day with anew card, Ferguson said helearned that almost his entire life savings was gone from his Coinbase account.

Scams

There have been reports ofsophisticated Coinbase phishing scams. The goal isusually togain access toand drainaccounts. Some ofthe most common scams atCoinbase:

Phishing scams

• Fraudulent emails, websites, ormessages that imitate Coinbase’s official communication totrick users into revealing their login credentials orother sensitive information.

Impersonation scams

• Scammers typically create fake social media profiles orwebsites that closely resemble Coinbase’s official channels, such as“CoinbaseUS.” Then, they use these platforms toimpersonate Coinbase support and trick users into providing account details ormaking fraudulent transactions.

Fake Coinbase apps

• Some scams involve the creation offake mobile apps that mimic the Coinbaseapp. Users might unknowingly download these apps, giving scammers access totheir account credentials and sensitive information.

Investment scams

• Scammers might promote fake investment opportunities orschemes, claiming tobeaffiliated with Coinbase.

Tech support scams

• Scammers will contact users posing asCoinbase support agents and claim anissue with the user’saccount. They may request remote access tothe user’s computer orask for payment toresolve theissue.

Giveaway scams

• Fake giveaways orpromotions that claim tobesponsored byCoinbase arecommon. Scammers may ask users tosend cryptocurrency toaspecified address inexchange for larger returns, which never materialize.

Fees and limits

Coinbase has also been confusing re: fees andpolicies. One could argue these aren’t directly related tosecurity. But ifcustomers can’t trust Coinbase tobetransparent with fees, how much can they trust the platform tokeep their accountssafe?

Transaction fees

Coinbase customers frequently seem confused bychanges atthe company too. This Reddit thread featured Coinbase customers wondering why network fees changed sodrasticallythere.

• I’ve been using Coinbase tosend and receive BTC for about 10years. Never had aproblem until amonth ago when Isent $100 ofBTC. Itwas confirmed $96sent. Ireceived $71. Afew days later Isent $100. Itwas confirmed and Inever receivedit. Today Isent $100. Itshowed $94 sent and Ionly received $71again. What amImissing here besides mymoney? I’ve done this same transaction literally over 200 times and have never had money not show up*rnot received what wassent.

Another Reddit thread advised, “Beware Coinbase’s outrageous hidden fees.”

• “Irecently had aterrible experience with excessive fees charged byCoinbase that Iwanted toshare asawarning toothers. Iconverted around $40,000 USDC tobitcoin onCoinbase. However, the resulting Bitcoin was only worth around $39,200— meaning Coinbase charged meabout $800 infees (about 3% fee rate for one single transaction)! The fee amount was exorbitant and not disclosed tomeahead oftime. Ithoroughly reviewed Coinbase’s trading records and could not find any details onthe specific fees for mytransaction. Asacustomer, Ihave aright toknow exactly what fees I’m beingcharged. The lack oftransparency around fees iscompletely unacceptable.”

Wealthsimple offered this advice re: Coinbase fees:

• Coinbase has alot offees that can eat into any money you’re making, especially ifyou trade regularly orwith significant amounts ofcash. There are alternatives tothe platform that provide strong returns without debilitating commissionrates.

Confusing policies

The company has also come under fire for its unclear policies.

According to anSEC complaint, Coinbase made billions ofdollars unlawfully facilitating the buying and selling ofcrypto assetsecurities. The SEC alleges that Coinbase intertwines the traditional services ofanexchange, broker, and clearing agency without having registered any ofthose functions with the Commission asrequired bylaw.

In2021, the Commodity Futures Trading Commission issued anorder against Coinbase for:

• “Reckless false, misleading, orinaccurate reporting aswell aswash trading byaformer employee onCoinbase’s GDAX platform.”

The order required Coinbase topay acivil monetary penalty of$6.5 million and tocease and desist from any further violations ofthe Commodity Exchange Act orCFTC regulations.

• “Reporting false, misleading, orinaccurate transaction information undermines the integrity ofdigital asset pricing, ” said Acting Director ofEnforcement Vincent McGonagle atthetime.

Confusion also surrounded Coinbase’s entry into the marketing ofcryptocurrency futures.

See: Coinbase Clarifies Crypto Shorting Confusion: “It’s Only For Our Clients.”

Following the recent announcement ofCoinbase’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 ofsuch technology not only toenhance corporate revenue but also asaprovider offuturescontracts.

Coinbase’s Garrett Balliett tried toput out the fire with this explanation:

• “Weoffer derivatives and futures products toour clients and institutional aswell, particularly institutional clients that doprovide thoseservices. But it’s somewhat conflated because that isn’t also the same asusactually taking out those positionsourselves. But while wemay beopening and closing positions for customers, wearen’t actually taking out the original position for aCoinbase.”

There were also questions around Coinbase’s policies re: Ethereum staking:

There are arguably too many question marks around Coinbase’s Ethereumstaking. It’s apotentially significant moneymaking project, but regulators have topin down their approach tothis stuff tomake itaninvestablequality.

Bankruptcy fears

• There’s also concern about what would happen ifthe company were tofile forbankruptcy. Inits quarterly report, Coinbase added arisk disclosure:

Ifthe company were tofile for bankruptcy, the court might treat customer assets that the exchange iscustodian for— their Bitcoin, Dogecoin orwhatever— asCoinbase’sassets. And they’d beatthe back ofthe line for repayment, forcing normal people, unaccustomed tothe ins and outs offederal bankruptcy court, toclaw back their money along with everybody else owed money bytheexchange.

Adam Levitin, aGeorgetown University law professor who studies bankruptcy, examined this scenario and wrote:

• “Sowhat happens toacustomer ifanexchange files forbankruptcy? Ithink itends very badly for the customers.”

Basically, customers would belast inline torecover theirmoney. Infact, they may wind upreceiving only pennies onthe dollar.

Conclusion

Customers are rightfully concerned with safety atCoinbase— just look atall the ongoing scams, spiteful reviews, and technical outages (often attimes ofpeak volume) going onthere.

Given all the above, it’s nosurprise that some have decided toseek out platforms which feel moresecure. Here’s one longtime customer explaining why they’re leaving Coinbase:

• “Ihave been along time customer ofCoinbase for about 4 years and have put over $125,000 dollars into crypto using theplatform. This platform istrash and Iwill never invest with themagain… Goodluck talking totheir customer service orgetting them tohelp you with anything they will just continue tohave you security lock you account out, and tell you ifyou want them tohelp you then make anew account with the new number???? from this point onIwill becontacting myattorney because this scam platform isstealing mymoney!!!”

Crypto.com comparison

Let’s compare Coinbase with its biggest competitor: Crypto.com. Coinbase keeps 98% ofcryptocurrency incold storage while Crypto.com stores 100% incold storage.

The Crypto.com wallet provides private keys encrypted locally onauser’s device.

AtCoinbase, the trading account does not allow you tomanage your private keys— however, the platform’s stand-alone wallet does (and you can have the keys onyour device).

Bitcoin isabearer asset, meaning you can hold the private keys toyour Bitcoininapersonal Bitcoin wallet ofyour choosing.

Ifyou person­ally don’t control the private keys associ­ated with your Bitcoin, then you don’t actually hold your ownBitcoin.

Inother words, ifanexchange orabank isholding your Bitcoin onyour behalf, you are not indirect control ofyourBitcoin. You are outsourcing the security ofyour Bitcoin toanotherparty.

Coinbase and altcoins

Companies that don’t platform altcoins may have anadvantage over Coinbase since itincurs large costs (legal and otherwise) bydepending somuch onaltcoins asarevenuesource.

Infact, Coinbase pays users towatch videos about how various kinds ofcrypto work, including altcoins that were cited within anSEC lawsuit. Nonetheless, Coinbase isactively encouraging customers toengage inthese risky investments.

Bitcoin ETFs arrive

The recent introduction ofBitcoin ETFs may take atoll onCoinbase too.

• Not everyone sees these ETFs asbullish for [Coinbase’s] stock. While Coinbase will benefit from the growth ofthese products using its brokerage and custody services, ultra-cheap ETFs will challenge Coinbase’s expensive fees for low-valuetrades. Should inflows dwindle, more weight will beplaced onnew products launched inrecent years that donot rely ontradingfees. This shift also transpires inthe backdrop ofalandmark suit from the Securities and Exchange Commission (SEC) that challenges many aspects ofCoinbase’sbusiness.

Coinbase alternatives

Asuncertainty surrounding Coinbase intensifies, more alternatives for buying Bitcoin are popping up.

Here’s alist ofthe three best Coinbase alternatives.

Perhaps the best reason toconsider moving toone ofthese platforms isbecause Coinbase supports many risky tokens (including some outright scams).

According tomany experts, platforms that stay away from these tokens and focus exclusively onBitcoin (i.e. awell-established, widely accepted digital asset ingood standing with the U.S. government) are asafer bet inthe longrun.

Swan Bitcoin isYour Coinbase Alternative

While we’re admittedly biased, wesuggest using Swan Bitcoin asyour platform toinvest inBitcoin. It’s auser-friendly and intuitive platform that simplifies investing in, storing, and learning about Bitcoin.

Lyn Alden, author ofBroken Money, writes:

“Swan’s advantage isthat ithas lower fees than most other platforms, and better usability and customer service than most otherplatforms. Idon’t know any platform that can claim abetter combination ofboth fees and service, along with asustainable businessmodel. Itcomes with specialization.”

One reason Swan isagreat Coinbase alternative isits ability toautomate Bitcoin purchases atregularintervals. That creates adisciplined, low-time preference investment strategy tobuild wealth over time.

Give itatry and you’ll see why somany Coinbase customers have made the switch toSwan. Sign uphere today!