Coinbase Review: Fees, Security, Controversy

Coinbase is a major BItcoin exchange that has been around since 2012, and by the end of 2017 it has $12 million users, adding impressive numbers of users each month (around 1 million). You can track their impressive progress online.

Is Coinbase the best option to buy & trade Bitcoin online though? Let’s examine user experience in detail.

After you register you get to the sleek & soothing blue interface with trading charts:

Before you can buy your Bitcoins or other cryptocurrencies you will have to add your phone number and submit your ID, so Coinbase is far from an anonymous exchange. Coinbase needs an ID because it’s a centralized and regulated financial service provider based in UK. Naturally, to be “legit” in the eyes of a jurisdiction such as UK, Coinbase must identify their customers. So, Coinbase is “legit” in this sense, it was the first crypto exchange to get USA regulators approval, so it has to abide by anti-money laundering laws and adher to “know your customer” policy. Unfortunately they also lock most of their backed for unverified users, so getting to know the platform is hard without an ID submission.

Coinbase supports several major cryptocurrencies: Bitcoin, Litecoin and Ethereum. Among that, Euro you own is considered part of your portfolio:

To purchase any of these you would have to add a payment method, selecting from a bank account or credit card:

Coinbase accepts deposit from any bank that can make and accept SEPA payments, it won’t work with Nationwide UK accounts though. If you are wondering whether Coinbase is safe to link your bank account to – yes it is, there is practically no way they can maliciously or negligently harm the account in your bank. Any money you do not deposit yourself is absolutely safe.

US customers will also have the option of purchasing Bitcoin with PayPal so that’s another undocumented payment method that’s not obvious for an unverified customer.

The bank account and the credit card have different deposit and withdrawal limits.

Coinbase bank account and credit card deposit and withdrawal limits

Unfortunately you won’t be able to find a clear limits table anywhere unless you submit an ID and pass verification at Coinbase. The “limits” page in your dashboard is locked:

You will not be able to know your purchasing limits until you actually set out to deposit and buy Bitcoin. Their knowledgebase is also being very vague about limits, which means they can change – that’s kind of offputting, though may give large volume Bitcoin buyers a chance to negotiate something with Coinbase support.

Coinbase fees

Coinbase fees are split into several tiers, they are explained in their knowledgebase, but here’s the essence:

a) Coinbase fees are highest for “instant” purchases of Bitcoin with a credit card – that is 3.99% for Australia, Canada, Singapore, UK, Europe and USA.

b) Bank transfers are the cheapest, from free/€0.15 for SEPA bank transfers to 1.49% for US bank account (ACH is free)

c) There are two “methods” Coinbase determines their fees, and, in addition to everything specified above they can use “Method 2” meaning the fees are variable and can be more than 2.49% of the transaction. These variable fees are displayed right before you transact, so it’s pretty much impossible to plan your spending on Coinbase fees in advance.

Coinbase reviews on Reddit and other sites

While selecting a place to buy your Bitcoin make sure you visit social media sites and check for reviews there. Coinbase reviews on reddit and other user-generated content social media sites are far from ideal.

Here’s a TrustPilot score:

Here’s a quick collection of Reddit posts on Coinbase warning the website could be a “scam”:

Coinbase Controversy & Problems

Well, the whole Coinbase operation is far from being a scam, but it’s still holding a so-so reputation in the Bitcoin community, and here’s a quick list:

• close ties to the banking industry (investments from USAA, Adreesseen Horowitz, Bank of Tokyo et al)
• questionable political stances on Bitcoin forks (calls for more centralization and corporate fork segwit2xsupport)
• pending patents on generic phrases like “instant exchange”, “bictoin exchange”, “tip button” and more.
• overly zealous account policying. Accounts can be flagged and closed at the first suspicion of any questionable activity (which could mean anything), – that’s the price of being regulated in the US as it seems.

Is Coinbase insured?

Coinbase is insured by FDIC – each US customer’ wallet is insured for $250000. Non-US customers supposedly have their funds insured as well, though there are doubts from independent investigators:

Coinbase insurance Details from CoinBase

Is Coinbase safe?

Coinbase could be anti-privacy, not customer-friendly and too concentrated on being a “conventional” financial institution, but if it’s one thing – it’s safe. It’s a US regulated institution that will hardly risk its’ reputation and litigation to screw customers of their money directly.

In fact, Coinbase is mostly the “mainstream adoption” gateway into Bitcoin for people who are not yet used to the idea that the financial system is changing with cryptocurrencies. If you are comfortable with banks and the way they run business, buying Bitcoin on Coinbase is not the worst option, the exchange is reliable. It’s not the “cryotocurrency experience” though, but that’s another story already.

Important security alert!