In the event of a bankruptcy, Coinbase's customers would be treated as our unsecured creditors. This means that Coinbase's customers with cryptocurrency assets on our platform could lose some or all of the value of their assets in the event of Coinbase's bankruptcy. Coinbase currently holds a portion of customer funds in custodial accounts. Coinbase holds cryptocurrency assets on your behalf and you may not be able to recover these assets.
This is the highest-impact financial risk in the entire agreement: unlike money in an FDIC-insured bank, cryptocurrency held on Coinbase is not protected if Coinbase fails, as demonstrated by the Celsius and FTX collapses where customers lost billions.
Coinbase's User Agreement gives the company broad unilateral powers to suspend accounts, freeze funds, and reverse transactions with limited notice, directly affecting your access to your money and cryptocurrency. In the event of Coinbase's insolvency, cryptocurrency held in your Coinbase account may be treated as Coinbase's property under bankruptcy law, leaving you as an unsecured creditor rather than the outright owner of your assets. You can withdraw your cryptocurrency to a self-custodied hardware or software wallet to avoid platform insolvency risk, and you can opt out of mandatory arbitration by sending written notice to Coinbase within 30 days of first accepting the agreement.