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Why would you leave your bitcoins at Coinbase? Nothing against them, but you should always secure your own bitcoins. The only exception might be day traders, who have to leave some coins/cash on the exchanges.
The problem I have with storing them in an offline wallet is that if I lose my private key I'm screwed. For me using an offline wallet is comparable to hiding your cash under your mattress, personally I feel safer by keeping my bitcoins in a web wallet. I'm just curious if Coinbase could get into any sort of trouble with the government if they decided to start stealing coins.
Encrypt your private key then store it in a bunch of places on usb-sticks, DVDs, etc. You van even email it to yourself if you use sufficient encryption and pw-strength.
Also, M of N paper wallets.
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Now if for some reason Coinbase went bankrupt could they take everyone's bitcoins from their wallets?
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Now if for some reason Coinbase went bankrupt could they take everyone's bitcoins from their wallets?
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Yes. Don't store much money in web-wallets! Bitcoin gives you the power to store and fully manage your own electronic cash. Read up on how to do that securely, and then do it!
Though I'd be more concerned about a hack, or internal theft (ie, an insider (or M of N insiders) steals coins) than losing coins due to a typical bankruptcy scenario. The bankruptcy case probably wouldn't be as catastrophic, since customer funds *should* be at the top of the capital structure and get reimbursed before any other creditors. But I know some Cypriot bank customers who'd scoff at that one (https://bitcointalksearch.org/topic/my-bank-accounts-got-robbed-by-european-commission-over-700k-is-lost-160292)...
My question is..
In the United States, the money you have in the bank (up to a quarter million) is insured by the FDIC, so if your bank fails you will get your money back. Now if for some reason Coinbase went bankrupt could they take everyone's bitcoins from their wallets? Obviously the FDIC doesn't insure bitcoins, and as everyone knows bitcoin transactions are irreversible.
In the United States, the money you have in the bank (up to a quarter million) is insured by the FDIC, so if your bank fails you will get your money back. Now if for some reason Coinbase went bankrupt could they take everyone's bitcoins from their wallets? Obviously the FDIC doesn't insure bitcoins, and as everyone knows bitcoin transactions are irreversible.
Why would you leave your bitcoins at Coinbase? Nothing against them, but you should always secure your own bitcoins. The only exception might be day traders, who have to leave some coins/cash on the exchanges.
As pointed out coinbase isn't a bank so the BTC on deposit and USD on deposit are identical, they are both assets under the ownership of the depositors but under the control of the operating company.
If coinbase went bankrupt depositors (BTC and/or USD) would be creditors. No different than any other exchange. Now it would be possible (but AFAIK no company has done so) for an exchange/wallet provider to setup a trust to hold customer deposits which would provide legal protection of those deposits in the event of financial or legal problems with the operating company.
This isn't specific to coinbase, it pretty much applies to any company, in any business, anywhere in the world where the company holds customer funds. The concept is called bailment. The company holding the funds (but is not the owner of the funds) is acting as a "bailor" and the customers who puts funds on deposit are acting as a "bailee" (owner but not holder of funds).
If coinbase went bankrupt depositors (BTC and/or USD) would be creditors. No different than any other exchange. Now it would be possible (but AFAIK no company has done so) for an exchange/wallet provider to setup a trust to hold customer deposits which would provide legal protection of those deposits in the event of financial or legal problems with the operating company.
This isn't specific to coinbase, it pretty much applies to any company, in any business, anywhere in the world where the company holds customer funds. The concept is called bailment. The company holding the funds (but is not the owner of the funds) is acting as a "bailor" and the customers who puts funds on deposit are acting as a "bailee" (owner but not holder of funds).
Coinbase is not a bank.
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