Personally, I could care less if their work space was known or not, as long as they don't pull a mtgox. I only need to know that my funds are safe.
Speaking of which, where can I verify that my fiat on there is indeed FDIC insured? And wouldn't that be great if insurance was also extended to BTC... yeah right
My understanding is that your fiat balance is not FDIC insured (someone can correct me on this if I am wrong). What I have read is that 'Coinbase's fiat funds will be held at an FDIC insured bank' which means that Coinbase is protected (up to deposit limits) in the event the bank they hold they fiat balance at fails. My understanding is that this is different then FDIC pass though insurance where if the bank fails your portion of Coinbase's deposits are insured up to FDIC limits (assuming you do not have a bank account at the bank in question) plus segregation of customer funds (customer money is kept in separate accounts as company money).
My understanding is that if Coinbase were to fail/file bankruptcy and you had money in your USD balance then the FDIC would not step into protect you
If customer deposits were insured by FDIC against Coinbase mishaps and misdeed, they would say so on their site. What they say instead is that
their bank account is insured against failure
of the bank.
Moreover I have been told that, in order to get "passthrough" insurance by the FDIC, the company must inform the bank about the balances of each client. (Can anyone confirm this?) This reporting seems quite impractical for an exchange that will make thousands of trades per hour, 24/7.
As for BTC balances, the site says tha only their "hot wallet" is insured against theft, embezzlement, and other losses. The site also says that they will keep less than 10% of the clients' BTC funds in the hot wallet.
Add to that the claims of "first in the US", and "licensed in NY and CA". Coinbase seems to think that marketing is more important than trust, and that misunderstandings like the above are good for business. To me, they spell immaturity non-trustworthiness.
According to
Howstuffworks(which lists paypal as their source)
Although PayPal itself isn't an FDIC-insured bank, it does keep your funds in various FDIC-insured banks across the country (Go here to see which ones PayPal currently uses). According to PayPal, your funds are eligible for something called pass-through insurance. Basically, this means that you can recover your money even if the bank fails. This insurance does not protect you if PayPal fails, although the company claims that "your funds will also be protected from any claims of PayPal's creditors and will be returned to you even in the unlikely event of a PayPal insolvency"
So in other words pass through FDIC insurance will only protect you against
bank failure, not the failure of the company you have your funds on deposit at (which in this case would be coinbase).
You are correct about their hot wallet insurance, which again is really protecting coinbase, not their customers (coinbase likely has sufficient capital to absorb a theft of their hot wallet).
I would say that the assumption that coinbase was in fact licensed in CA and NY has to do with the fact that much/most of the bitcoin related media is really not qualified to be reporting the news (to put it nicely) and the MSM probably picked up on a story by a site like CCN and did not properly check their facts
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