If Vanguard went bankrupt, would customers lose all their stocks?
Coinbase warns that bankruptcy could wipe out user funds
321–330 of 473 posts
Re: Coinbase warns that bankruptcy could wipe out user funds
#322Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…
> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments.
The problem isn't crypto, it's these exchanges. Nearly everyone just leaves their coins in the exchanges. They're essentially banks but with none of the protections. They even offer cryptocurrency loans, savings accounts and everything.
Cryptocurrencies were supposed to replace banks but they ended up reinventing the whole thing badly. It was supposed to be a dollars -> electricity -> CPU -> bitcoins closed decentralized system, but now it's just dollars bitcoin within centralized exchanges.
Re: Coinbase warns that bankruptcy could wipe out user funds
#323I have been trying, unsuccessfully for 2 years to validate my account on Coinbase. I have over 100k in ETH stored in their wallet, have the highest levels of access to their services but CANNOT trade because they have NO HUMANS available. Their systems DO NOT work and there is NO contact info nor any way to actually reach a person. So I have been trading with others and will never use CB for anything but cold storage…
Why do you say Coinbase is good for cold storage? It’s not custodied so in the event they went bankrupt/sanctions compliance/TOS violation, they could lock you out forever. A hardware wallet is good for cold storage. Coinbase is a hot wallet.
Re: Coinbase warns that bankruptcy could wipe out user funds
#324Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…
> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are risk adjusted rates for not having insurance.
You are missing the point. We are shocked that even if Coinbase keeps users' deposits 100% safe, users could still lose their deposits if a judge decides so. Why isn't there a way to segregate those deposits from assets on which creditors have a claim? This kind of simple arrangement ought to be possible without new regulations or FDIC-style protection.
Needless to say, "not your keys not your Bitcoin" continues to be good advice.
Re: Coinbase warns that bankruptcy could wipe out user funds
#325Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…
> Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. Is Coinbase "loaning" out the Bitcoin users have deposited in it? The reason banks need the FDIC is that they loan your deposits out instead of throwing it in a vault and sitting on it, so if they go under they don'…
> Is Coinbase "loaning" out the Bitcoin users have deposited in it?
Maybe not Bitcoin, because I don't know if Bitcoin has any staking protocols in it.
But things like Anchor / UST / Luna participated in a staking scheme, where if you promised not to sell UST, you'd get 20% APY gains (measured in UST of course, not US-dollars).
Coinbase could be participating in those schemes in a group wallet-setting. Ex: UST holdings at Coinbase would be staked, so that Coinbase would get those gains. Or with other coins with such benefits??
I'm mostly pulling this out of my ass btw. I don't know the structure of Coinbase. But I can see the "incentivizing" from the various cryptocoins on the market or the various "protocols" that allow for exponential growth (as long as you "lend" or "stake" your coins somewhere else).
Re: Coinbase warns that bankruptcy could wipe out user funds
#326Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…
> Since coinbase isn’t FDIC insured, The Fortune article in the HN link is writing only about the crypto assets, which lack FDIC insurance. Cash assets are FDIC insured. From Coinbase: "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." https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
> "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."
Doesn't that mean Coinbase is insulated from the banks going bust? I don't know why a "pooled custodial account" would help the Coinbase user. It's still Coinbase's money held for them (just like the BTC).
But maybe it does. I'm slightly ignorant here.
Re: Coinbase warns that bankruptcy could wipe out user funds
#327Earlier quoted context omitted.
I usually don't bother to login to comment, but I felt compelled in this case. The other replies include a lot of bad advice. You sound like you don't have much of experience actually using bitcoin (or cryptocurrencies). So the best (most secure and easiest) solution is to buy a hardware wallet and use the wallet app which they provide. I suggest either Trezor [1] or Ledger [2]. Do not buy a hardware wallet from seco…
What happens if ledger goes out of business? I recall users being able to access their funds when Ledger had a systems outage some time in the past few years.
The users weren't unable to access their funds. However, Ledger Live (their desktop and mobile app) uses nodes hosted by Ledger, so effectively this meant that non-technical users who relied on their hosted nodes couldn't access their funds.
One could (and should!) still use the same wallet with a self-hosted node, or a third-party one, by using the wallet with a different software (which is also officially supported; Ledger provides docs for doing so).
Re: Coinbase warns that bankruptcy could wipe out user funds
#328If Vanguard went bankrupt, would customers lose all their stocks?
No. SIPC would make the customers whole first before letting any creditors access their shares. The issue is Coinbase is not handled by SIPC (or similarly the FDIC).
Re: Coinbase warns that bankruptcy could wipe out user funds
#329Earlier quoted context omitted.
> What i don't understand is why don't people create their own wallet and keep their funds there? Isn't that the entire purpose? Of course they could still use coinbase as an exchange. But if everyone let's another party "manage" their wallet in what way is it really decentralized... The real purpose of Bitcoin is to speculate on the roller coaster. Everything else is basically woo that's needed to fuel it. The "futu…
> The real purpose of Bitcoin is to speculate on the roller coaster. > Everything else is basically woo that's needed to fuel the speculative roller coaster. For some people sure, but not all, and I would even go as far as to say not the main intention of the original product.
> the main intention of the original product.
AFAICT, the main intention of the original product was to undermine fiat currency, and by proxy, the institutions that are built on and support it, primarily governments and central banks but extending beyond that to broader societal institutions that use taxes and monetary policy as their tools.
I'm not so sure it's done with that yet.
The financial FOMO that fuels that goal just seems like a means to that end, and the climate damage from it's energy consumption seems like an (unintended?) second order effect whose problematic nature needs to be rationalized post hoc.
Re: Coinbase warns that bankruptcy could wipe out user funds
#330I have been trying, unsuccessfully for 2 years to validate my account on Coinbase. I have over 100k in ETH stored in their wallet, have the highest levels of access to their services but CANNOT trade because they have NO HUMANS available. Their systems DO NOT work and there is NO contact info nor any way to actually reach a person. So I have been trading with others and will never use CB for anything but cold storage…
Why do you say Coinbase is good for cold storage? It’s not custodied so in the event they went bankrupt/sanctions compliance/TOS violation, they could lock you out forever. A hardware wallet is good for cold storage. Coinbase is a hot wallet.
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