Is Coinbase on the Brink of Collapse? CEO Jan Sell Lists 10 Reasons Why That's Impossible

Jan Sell, who previously played a crucial role in establishing Binance’s German division, now leads Coinbase as managing director. Here, Sell details why Coinbase remains the safest crypto platform, ensuring it won’t face a collapse similar to FTX.

Coinbase managing director Jan Sell has outlined 10 reasons why the crypto exchange is unlikely to face a collapse like FTX.

In an interview with WirtschaftsWoche, Sell, who previously led Binance’s German operations, highlighted Coinbase’s crypto custody and liquidity strengths, IT security measures, and regulatory oversight.

1. 1:1 Customer Asset Provision

Coinbase holds customer deposits 1:1, Sell said, unlike FTX, which used customer deposits for risky trades.

“This is confirmed by regular audits by independent firms like Deloitte,” he added.

2. High Liquidity

FTX’s downfall was partly due to its lack of liquidity, with liabilities vastly exceeding liquid assets, Sell noted.

In contrast, Coinbase had $7.1 billion in unencumbered liquid assets, as per its Q1 2024 financial report, in addition to the 1:1 customer asset holdings, Sell said.

3. Offline and Decentralized Crypto Storage

Up to 97% of cryptocurrencies on Coinbase are stored in cold wallets, Sell said, which are offline and geographically distributed.

These wallets utilize Multi-Party Computation (MPC) and Hardware Security Modules (HSM), reducing the risk of single points of failure and ensuring robust security, he added.

4. Custodian of Bitcoin ETFs

Financial giants like Grayscale, Blackrock, and WisdomTree trust Coinbase as the custodian for their Bitcoin ETFs, Sell noted.

“This trust signifies Coinbase’s secure asset storage, robust trading infrastructure, and compliance with regulatory requirements,” he said.

5. Top-Tier IT and Data Security

Coinbase uses AES-256 encryption for personal data, Sell said, the same standard used by governments and financial institutions.

It also employs the latest SSL/TLS standards to secure data transmission, offering advanced protection against cyberattacks, he added.

6. Advanced Two-Factor Authentication (2FA)

Coinbase provides various advanced 2FA methods, Sell said, including apps, SMS, tokens, and U2F security keys like Yubikey, to protect customer accounts from phishing attacks.

7. Coinbase Vault for Extra Security

The Coinbase Vault adds an extra layer of security by requiring transaction confirmations from other users and implementing a 48-hour waiting period, Sell noted.

It also sends email confirmations for all account activities, allowing users to spot suspicious actions quickly, he added.

8. Integrated Wallet for Self-Storage

Coinbase offers a free software wallet for self-storage of crypto keys, Sell said, giving customers full control over their assets.

This wallet supports over 400 cryptocurrencies and connects easily to Coinbase accounts, he added. Using Coinbase’s Layer 2 solution Base, users can transfer cryptocurrencies with minimal network fees.

9. First Crypto Custodian Licensed by BaFin

Coinbase was the first crypto broker licensed by Germany’s BaFin, Sell noted, demonstrating its compliance with comprehensive crypto regulations.

BaFin monitors anti-money laundering measures, customer confidentiality, and adherence to tax and accounting standards, Sell said.

10. Listed on NASDAQ

Being listed on the NASDAQ stock exchange requires Coinbase to maintain transparency, Sell said.

Quarterly reports with audited figures on liquidity and business development are publicly accessible, ensuring accountability and trust, he added.

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