Coinbase And Your Privacy: What You Need To Know

Coinbase is a cryptocurrency exchange that allows users to buy, sell, trade, and store cryptocurrencies. It is the world's most trusted platform for such transactions and is the only publicly traded crypto exchange in the US. However, Coinbase has been accused of monitoring and tracking how its users spend their Bitcoins, even after withdrawing them from their Coinbase wallets. This has led to concerns about privacy and the company's motives, with some users reporting that their accounts have been closed due to transactions that Coinbase objected to, such as purchasing cannabis or selling coins on LocalBitcoins. While Coinbase claims it is simply complying with federal anti-money laundering regulations and drug laws, this practice goes against the very nature of Bitcoin and virtual currencies, which aim to provide freedom and anonymity.

Coinbase monitors transactions and spending patterns

Coinbase justifies its actions by claiming that it is trying to stay in compliance with federal anti-money laundering regulations and drug laws. However, critics argue that these practices go against the very nature of Bitcoin and virtual currencies, which are meant to provide freedom and privacy.

Additionally, Coinbase has been criticized for its poor customer service, with users reporting issues like hacks and locked accounts that are challenging to resolve. The company has also faced legal troubles, with the Securities and Exchange Commission charging Coinbase with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.

While Coinbase provides a user-friendly platform for buying and selling cryptocurrencies, its monitoring of transactions and spending patterns raises concerns about privacy and the company's handling of user data.

Coinbase can ban users for violating ToS

Coinbase can ban users for violating its Terms of Service (ToS). According to its ToS, Coinbase may suspend, restrict, or terminate access to any or all Coinbase services and deactivate or cancel user accounts with immediate effect for any reason at its sole discretion. While Coinbase is not obligated to disclose the details of its decision to take such actions, it will generally do so when required by law or applicable regulations.

Coinbase's decision to take certain actions, including limiting access to, suspending, or closing user accounts, may be based on confidential criteria that are essential to the company's risk management and security protocols. The company also reserves the right to refuse to process or to cancel, correct, claw back, or reverse any digital asset transaction or transfers in its sole discretion.

Some examples of actions that violate Coinbase's ToS include:

• Using a VPN to spoof one's true citizenship or identity
• Attempting to create multiple accounts
• Buying drugs or drug-related items

Coinbase holds users' private keys

Coinbase does monitor transactions on its platform. A user on Reddit reported that Coinbase terminated their account, citing evidence of a transaction involving cannabis/cannabis seeds. This suggests that Coinbase may monitor transactions for certain types of activities or violations of their Terms of Service.

Now, regarding the statement "Coinbase holds users' private keys," it is important to understand the concept of private keys and their role in cryptocurrency. A private key is like a password or a string of letters and numbers that allows you to access and manage your crypto funds. When you buy cryptocurrency, you are issued two keys: a public key and a private key. The public key works like an email address, which can be shared with others to send or receive funds. On the other hand, the private key should be kept secure and not shared with anyone, as it provides access to your crypto funds.

Coinbase offers a "hot" wallet, a virtual wallet to manage private keys. This wallet type is connected to the internet, making cryptocurrency transactions convenient and accessible. However, it is essential to choose a wallet provider with a strong security track record and features like two-factor authentication. Alternatively, some investors prefer "cold storage," keeping their private keys offline, such as on a computer not connected to the internet or even memorizing them. While "cold storage" protects against digital theft, it makes using cryptocurrency less convenient and introduces other risks.

In conclusion, while Coinbase does monitor transactions to some extent, the platform also provides a secure wallet option for users' private keys. The choice between "hot" and "cold" wallets depends on individual preferences for convenience and security.

Coinbase has poor customer service

Coinbase has been criticised for its poor customer service. Users have complained about the company's overseas helpdesk, which is said to be ineffective and provide scripted and verbose responses. There are also allegations that customer support representatives close tickets without resolving issues, potentially to maintain call statistics and receive bonuses.

In addition to complaints about the quality of Coinbase's customer service, there are also concerns about the company's monitoring of transactions. Some users have reported receiving emails informing them that they are being banned from using Coinbase's services due to violations of the company's terms of service. In one case, a user was told that they had used Bitcoin to purchase cannabis or cannabis seeds. This has led to worries that Coinbase is monitoring how its customers use Bitcoin, which some argue defeats the purpose of the cryptocurrency.

Coinbase's customer service has also been criticised for being unhelpful and unresponsive. Some users have reported issues with their accounts, such as not being able to make purchases or withdrawals, and have complained that their tickets and inquiries go unanswered or are not adequately addressed. There are also reports of accounts being blocked or restricted without explanation, and difficulties in updating account details.

Overall, while Coinbase offers a user-friendly interface for buying, selling, and storing digital currencies, its customer service has been a source of significant frustration for many users. The issues raised range from unhelpful and unresponsive support to concerns about the company's transaction monitoring practices.

Coinbase is not FDIC insured

Coinbase is not an FDIC-insured bank. Cryptocurrency is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC). If Coinbase goes bankrupt, customer currencies will likely be lost as well.

For U.S. customers, Coinbase combines balances with the balances of other customers and holds those funds in custodial accounts at U.S. banks and/or invests those funds in liquid U.S. Treasuries or USD-denominated money market funds in accordance with state money transmitter laws.

Funds could be held in any one of these three manners, so customers should not assume that funds are being held in one manner over the other. For non-U.S. customers, funds are held as cash in dedicated custodial accounts. All custodial pooled amounts are held separately from Coinbase funds, and Coinbase will neither use these funds for its operating expenses or any other corporate purposes.

To the extent U.S. customer funds are held as cash, they are maintained in pooled custodial accounts at one or more banks insured by the FDIC. Custodial accounts have been established to make pass-through FDIC insurance available up to the per-depositor coverage limit (currently $250,000 per individual). FDIC pass-through insurance protects funds held on behalf of a Coinbase customer against the risk of loss should any FDIC-insured bank(s) where Coinbase maintains custodial accounts fail.

FDIC insurance coverage is contingent upon Coinbase maintaining accurate records and on determinations of the FDIC as a receiver at the time of a receivership of a bank holding a custodial account.

Frequently asked questions