> Cash held at Coinbase is insured by the FDIC to $250,000
You’re protected “against the risk of loss should any FDIC-insured bank(s) where [Coinbase] maintain custodial accounts fail[s]” [1]. If Coinbase maintains “accurate records,” which nobody is checking, and “on determinations of the FDIC as receiver at the time of a receivership of a bank holding a custodial account.”
If Coinbase itself fails, you’re just another unsecured creditor. Maybe a bankruptcy judge will find your deposits to be a § 507(a)(7) customer deposit, in which case $2,600 of it is a priority claim [2]. For the rest of it, you’re a general unsecured creditor. Behind every lender.
Note that the Coinbase FAQ we cite is worded in an intentionally misleading manner. That copy wouldn’t fly at a bank, or, at the very least, produce liability for it in a manner that would actually pay out.
Reading the text a couple of times, it's actually far, far less secure than that:
> Fiat balances, such as U.S. dollars, British pounds, or euros, are held in your Coinbase e-money wallets as a balance in your Coinbase or Coinbase Pro account(s). For U.S. customers, Coinbase combines your balance with the balances of other customers and holds those funds in either: 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.
So, if your funds were held in the custodial account (which you're explicitly told not to assume), and if Coinbase maintained "accurate records" (lolwut?), and if the bank where the custodial account is failed, then you're going to be made whole. Notably, Coinbase itself failing isn't part of that "if" chain.
You’re protected “against the risk of loss should any FDIC-insured bank(s) where [Coinbase] maintain custodial accounts fail[s]” [1]. If Coinbase maintains “accurate records,” which nobody is checking, and “on determinations of the FDIC as receiver at the time of a receivership of a bank holding a custodial account.”
If Coinbase itself fails, you’re just another unsecured creditor. Maybe a bankruptcy judge will find your deposits to be a § 507(a)(7) customer deposit, in which case $2,600 of it is a priority claim [2]. For the rest of it, you’re a general unsecured creditor. Behind every lender.
Note that the Coinbase FAQ we cite is worded in an intentionally misleading manner. That copy wouldn’t fly at a bank, or, at the very least, produce liability for it in a manner that would actually pay out.
[1] https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
[2] https://www.bdo.com/insights/industries/retail-consumer-prod...