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Coinbase warns users could lose their crypto holdings if company goes bankrupt

businessinsider.com

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Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#11

Post by ceejayoz »

0daystock wrote: post #10
ceejayoz wrote: post #8

Earlier quoted context omitted.

> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits , it has to cover failures . The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.

It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax payers billions of dollars and the institution the government created to insure deposits failed spectacularly.

And the government stepped in to meet obligations to make depositors whole. The S&L industry collapsed, the folks with $100k of retirement savings in the bank did not. FSLIC got rolled into FDIC for a large insurance risk pool, too.

They're not going to do that for Coinbase.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#12

Post by mumblemumble »

0daystock wrote: post #10
ceejayoz wrote: post #8

Earlier quoted context omitted.

> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits , it has to cover failures . The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.

It's amazing how quickly we forget history, apparently ignoring the bank crisis of the 1980s and complete failure of FSLIC. Multiple banks collapsed costing tax payers billions of dollars and the institution the government created to insure deposits failed spectacularly.

It's worth pointing out that the collapse of the S&L industry is widely recognized as being largely a result of loosening of regulations in the 1980s.

https://www.thebalance.com/savings-and-loans-crisis-causes-c...

Leaving aside the question of whether it's advisable to have the government in this business in the first place, I'd say we should at least agree that, if it's going to happen, financial institutions that benefit from these programs should be required to be absolutely allergic to risk. Letting firms make questionable loans and pocket the profits while passing the risk on to taxpayers has, as far as I'm aware, never worked out well in practice.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#14

Post by kkielhofner »

mikece wrote: post #3

A whole bunch of people could learn the hard way the difference between "custodial wallets" and "your own wallet" very, very quickly. I've been telling friends who are into BTC to get their holdings off of Coinbase and into their own wallet (or cash out to fiat and disconnect their bank account from Coinbase -- I have no idea if claw-back is a thing here but why wait to find out?). Personally I moved holdings to Blue…

I’ve mentioned this several times before but the risk calculation here is balancing between $EXCHANGE preventing withdrawals or forgetting your seed phrase, having your wallet hacked, or some other user error.

It would be interesting to somehow compare funds lost in exchange hacks/insolvency/etc and funds lost forever due to users attempting to manage their own wallets.

In both cases you’re risking losing everything.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#15

Post by JCharante »

kkielhofner wrote: post #14
mikece wrote: post #3

A whole bunch of people could learn the hard way the difference between "custodial wallets" and "your own wallet" very, very quickly. I've been telling friends who are into BTC to get their holdings off of Coinbase and into their own wallet (or cash out to fiat and disconnect their bank account from Coinbase -- I have no idea if claw-back is a thing here but why wait to find out?). Personally I moved holdings to Blue…

I’ve mentioned this several times before but the risk calculation here is balancing between $EXCHANGE preventing withdrawals or forgetting your seed phrase, having your wallet hacked, or some other user error. It would be interesting to somehow compare funds lost in exchange hacks/insolvency/etc and funds lost forever due to users attempting to manage their own wallets. In both cases you’re risking losing everything.

Well if you do half and half, you're only risking losing half at a time.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#16

Post by JCharante »

0daystock wrote: post #7
ceejayoz wrote: post #5

Earlier quoted context omitted.

Are we just pretending the FDIC doesn't exist? From the article: > It's a different scenario from traditional investments. Many bank accounts, including checking and savings, are insured by the Federal Deposit Insurance Corp. for up to $250,000 per account if the bank goes under, while the Securities Investor Protection Corp. helps if a broker or dealer goes bankrupt.

Are you pretending FDIC covers more than 1% of all deposits? If so, please refer to the Fed website for a sobering realization.

Well it's $250k per depositor per bank, and you can have single and joint accounts which doubles it. You can have more than a million that is FDIC insured, and that's good enough for most people, and if you lose your money beyond that then to be honest people don't need more than a million to still live a comfortable life that you can "restart" from.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#19

Post by Finnucane »

ceejayoz wrote: post #8
0daystock wrote: post #7

Earlier quoted context omitted.

Are you pretending FDIC covers more than 1% of all deposits? If so, please refer to the Fed website for a sobering realization.

> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits , it has to cover failures . The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.

Though the WAMU failure in 2008 nearly broke the FDIC. You know the cartoon of the snake eating the elephant? It was like that.

Samll banks, on the other hand, fail every week and the FDIC cleans them up so fast no one even notices.

Re: Coinbase warns users could lose their crypto holdings if company goes bankrupt

#20

Post by ceejayoz »

Finnucane wrote: post #19
ceejayoz wrote: post #8

Earlier quoted context omitted.

> Are you pretending FDIC covers more than 1% of all deposits? It doesn't have to cover all of deposits , it has to cover failures . The chances of every bank in the country simultaneously collapsing is slim (and you've got bigger problems at that point than your balance). No one's lost a penny worth of FDIC-insured funds since 1933.

Though the WAMU failure in 2008 nearly broke the FDIC. You know the cartoon of the snake eating the elephant? It was like that. Samll banks, on the other hand, fail every week and the FDIC cleans them up so fast no one even notices.

The WAMU failure also serves as a pretty good example of the other levers available in traditional banking regulation (and the pressure on the government to find a fix) that Coinbase is unlikely to be able to avail themselves of.
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