Coinbase’s Weekend Withdrawal Shutdown
On Sunday the major crypto exchange Coinbase announced that they were investigating an issue with processing deposits or withdrawals from US bank accounts.
Because Bitcoin
March 8, 2023
On Sunday the major crypto exchange Coinbase announced that they were investigating an issue with processing deposits or withdrawals from US bank accounts. In the official announcement, Coinbase stated, “We are currently unable to take payments or make withdrawals involving US bank accounts. Our team is aware of this issue and is working on getting everything back to normal as soon as possible. You may use a debit card or PayPal account to make direct buys on your account should you wish.”
The issue was resolved almost seven hours after the initial investigation had begun. See below for a full timeline via the Coinbase status page, utilized to inform and communicate any issues with outages.
Counterparty Risk
This is not the first time Coinbase has been subject to technical difficulties. Some instances unfortunately resulted in loss of funds through hacks. Just months after the company went public, CNBC posted accounts of three users who had funds hacked from their account. After trying to contact customer support, most were left with unfulfilling responses from the corporation. One user recounted the email from Coinbase saying, “There is no credible or supportable evidence that the compromise of your login credentials was the fault of Coinbase. As a result, Coinbase is unable to reimburse you for your alleged losses.”
Part of these technical issues stems from the fact that Coinbase users simply outgrew their security measures. The year of 2021 was a big year for crypto and exchanges were the main pathway for onboarding. Coinbase reported having over 8 million monthly users for last year with revenue just over $4.4 billion.
In May of 2021, Coinbase added some concerning words about risk disclosure in their quarterly update. The disclosure states that in the “unlikely event” of bankruptcy, the court might treat customer assets as Coinbase’s assets. Bloomberg wrote a piece that goes into this in more detail. Bottom line is that holding cash or crypto in an exchange is subject to some level of counterparty risk. Those who have a low time preference on their crypto assets should strongly consider purchasing a hardware signing device (cold storage device) for extra security. This method comes with its own educational hurdles as it transfers all the risk onto yourself and no one else.
What might have been a nail biting experience for a few hours turned out to be a basic ACH transfer issue on behalf of Coinbase. Even big banks have these types of issues from time to time and it is not uncommon to see them once in a while for traditional and crypto exchanges. Although this was resolved in a relatively short amount of time, it’s important to keep an eye on certain counterparty risks within the crypto space. The Celcius situation earlier this year was a perfect example of the phrase “not your keys, not your coins”.