Is Coinbase a Scam?

If you’re thinking of using Coinbase, you need to know: Is Coinbase a scam? 

Below, we explain whether Coinbase is a scam and discuss some steps you can take to improve your safety when using this platform. 

What Is Coinbase?

Coinbase is an exchange platform for cryptocurrencies and a public company. 

You can use Coinbase to buy, trade, sell, and store hundreds of cryptocurrencies, including Ethereum, Bitcoin, and many others. 

There are two ways for you to store your cryptocurrencies: in a custodial wallet (on Coinbase) or a non-custodial wallet app (you control the private keys, but you also have to manage security).

Is Coinbase a Scam?

No, Coinbase is not a scam. It’s a legitimate cryptocurrency exchange platform. 

Coinbase gets positive reviews from third-party publications and sites.

For example, NerdWallet gives Coinbase a rating of 4.6 out of 5.0 stars. 

Some of the pros NerdWallet highlights include quick withdrawals and low minimum to fund your account. As for the cons, NerdWallet notes that Coinbase has higher fees compared to other similar exchanges and isn’t very transparent about its fees.

Similarly, Investopedia gives Coinbase a rating of 4.2 out of 5.0 stars. It lists poor customer service and Coinbase’s default wallet as the cons. 

User reviews on Coinbase are mainly positive:

• 4.0 out of 5.0 stars (from 17,511 reviews) on Trustpilot.
• 4.4 out of 5.0 stars (from 900k reviews and 50m+ downloads) on Google Play.
• 3.5 out of 5.0 stars (from 1,263 reviews) on REVIEWS.io.
• 4.7 out of 5.0 stars (from 1,762,975 reviews) on the App Store.    

On internet forums like Reddit, user reviews are mixed and lean more towards the negative.

Some users report having issues with their account being under review and Coinbase’s customer service being unhelpful. 

One person said: “Coinbase good until u have a problem. If you have a problem, it is the hardest thing in the world to solve it.”

The Coinbase subreddit currently features a mix of user complaints, security concerns, and account access issues, with some posts generally discussing Coinbase’s services and crypto-related experiences. 

Coinbase is not accredited by the Better Business Bureau (BBB) and has a 1.08 out of 5.0-star rating on the BBB website. 

Coinbase scams

As is the case with any major platform, criminals often impersonate Coinbase in their scams.

One recent scam involves a robocall from criminals saying there is suspicious activity on your Coinbase account. 

If you interact with the call, you receive a call from a “Coinbase agent” who guides you through legitimate-looking steps, builds credibility, and convinces you to share sensitive information, including your wallet seed phrase. Your assets are then drained instantly.

SEC investigations and lawsuits

The U.S. Securities and Exchange Commission (SEC) investigated Coinbase for alleged violations of federal securities law, including failing to register as a broker and offering unregistered securities through its staking-as-a-service program. 

Security

Coinbase has a page dedicated to security.

Here, it states that the company is publicly traded and, as a result, publishes quarterly financial statements and is audited annually by an independent third party. 

It doesn’t lend or take any action with your cryptocurrency assets without your permission. 

The platform provides mandatory 2-factor authentication, password protection, and multi-approval withdrawals in Coinbase Vault.

Coinbase has a bug bounty program where anyone can report vulnerabilities they find. 

The company recently disclosed that criminals bribed overseas support agents to steal customer data, an incident that affected nearly 70,000 accounts. Sensitive data stolen included names, addresses, phone numbers, emails, and partial government ID details. Passwords and private keys were not exposed. 

A class action complaint has been filed in response. 

Privacy 

Coinbase explains the kind of data it collects, why, and with whom it shares it in its privacy policy.

It collects information automatically, directly from you, and from third parties. 

The platform collects the following information:

• Basic customer information, e.g., name, date of birth, address, nationality, gender, phone number, email address, and country of residence.
• Supplemental identification information, e.g., utility bills, government-issued identity documents, Social Security numbers, etc.
• Electronic Identification (“EIDV”) information, i.e., biometric information from photos or videos you share. 
• Institutional information, if you’re an institutional Customer.
• Financial information, e.g., bank account number, payment card primary account number (“PAN”), tax identification number, etc. 
• Wallet information, i.e., wallet address and details about integrations you select.
• Preferences. 
• Transaction information, e.g., the name of the sender, the name of the recipient, the amount, etc. 
• Additional information you submit, e.g., communications and referral information. 
• App, browser, and device information. 
• Product usage information, i.e., what you view or click on while on Coinbase, and diagnostic and troubleshooting information. 
• Information from cookies and similar technologies.
• Information from affiliates and third parties, e.g., public database information, blockchain data, etc. 

It uses this information to deliver its services, provide you with a secure and smooth experience, comply with laws, and prevent fraud.

Coinbase may share your information with affiliates, linked third-party websites, TRUST (to comply with the Travel Rule), professional advisors, industry partners, authorities, regulators, and third-party service providers. It may also share your data in asset transfer or company acquisition. 

The platform retains your information as needed to provide you with its services. 

Depending on where you reside, you may be able to exercise your privacy rights, including the right to access, portability, and deletion. 

Terms of Service; Didn’t Read (ToS;DR), a project that rates internet services’ terms of service and privacy policies, gives Coinbase a “Grade D.”

This means, “The terms of service are very uneven, or there are some important issues that need your attention.”

Some of the issues flagged by ToS;DR include the following:

• Coinbase shares your personal data with third parties that are not involved in its operation.
• Many different types of personal data are collected.
• Your personal data may be used for marketing purposes.
• Your account can be deleted without prior notice and without a reason.
• This service reserves the right to disclose your personal information without notifying you.

On the plus side, ToS;DR states that you can request access, correction, and/or deletion of your data and your personal data is not sold. 

The Common Sense Privacy Program, which also rates internet services’ privacy policies, gives Coinbase a “Warning” rating. This means Coinbase “Does not meet our recommendations for privacy and security practices.”

The program notes the following as potential issues:

• Coinbase shares personal information for third-party marketing.
• It displays personalized advertising. 
• Third parties collect data for their own purposes.
• User information is used to track and target advertisements on other third-party websites or services.

It also says it’s unclear whether Coinbase creates and uses data profiles for personalized ads and whether personal information is sold or rented to third parties.

So, Should You Use Coinbase?

Probably. It’s one of the biggest cryptocurrency exchanges in the world. 

However, keep in mind that Coinbase has higher fees than competitors and that there are reports of account lockouts and slow or unhelpful support. 

How to Use Coinbase Safely and Privately 

• Create strong passwords. Don’t use passwords like “12345” or passwords that include your personal information (like your date of birth). Also, make them unique (i.e., don’t reuse them elsewhere online). 
• Choose your 2FA settings. 2-factor authentication is mandatory on Coinbase, but you can choose your 2FA settings. Coinbase recommends choosing two security keys (using one key as primary and the other key as backup).
• Monitor account activity. Periodically check for unknown login attempts to your Coinbase account in your account’s security settings. If you notice anything suspicious, lock your account immediately.
  Don’t fall for phishing attempts. Coinbase scams are common. Always go to the official Coinbase website or app to log in, and never click on any suspicious links in emails or text messages. Similarly, don’t share your personal information or 2FA codes or passwords with “Coinbase support.”
• Keep only small amounts on Coinbase for trading. Use a hardware wallet for large holdings. 
• Limit how much personal information you share. Only provide the required details. 
• Use a separate email for Coinbase. This can help keep your account more secure.
• Use separate wallets. For better privacy, transfer funds from Coinbase to a non-custodial wallet.
• Don’t reuse wallet addresses. Use a new wallet address each time when receiving crypto to reduce traceability.
• Stay informed. Follow Coinbase’s official blog and security alerts and consider joining r/Coinbase to stay on top of user-reported scams or outages.