Ripple CTO David Schwartz Chimes In on the \'Where to Keep Your Crypto\' Debate

A big name in crypto, Ripple's CTO David Schwartz, chimed in on the whole "where to keep your crypto" debate. While he did not outright diss platforms like Coinbase

Ripple CTO David Schwartz has weighed in on the ongoing debate about the safest place to store crypto. While he didn't directly criticize exchanges like Coinbase, he did point out that if an exchange fails, your crypto could go down with it.

The conversation began with someone asking about FDIC insurance for their USD held on Coinbase. Schwartz clarified that the FDIC only protects your cash in the event of a bank failure, not the exchange itself. This means that if Coinbase fails and the bank doesn't have sufficient funds to cover everyone, you could lose your money.

"Coinbase failure is not covered by FDIC insurance, only bank failure," Schwartz explained. "If an exchange fails and the bank has insufficient funds, you are not protected."

Schwartz added that he doesn't have any particular reason to believe that keeping crypto on Coinbase is inherently unsafe. However, he stressed that the risks associated with centralized exchanges should be taken into consideration.

"I have no particular reason to think it's not safe to keep crypto at Coinbase," he said. "But, as with other centralized exchanges, if they screw up enough, your funds will be lost. For many, it's still better than self-custody because the odds that you'll mess up are higher."

The conversation took an interesting turn when someone brought up the possibility of Coinbase using FDIC-insured banks to hold users' USD separately. In theory, this could ensure that your cash remains protected even if Coinbase encounters financial difficulties.

Schwartz agreed that this approach could work, but he emphasized that Coinbase would need to maintain meticulous records to ensure that everyone receives their fair share in the event of a bank failure.

"It could work, but Coinbase would need to keep good records of who owns what, to make sure everyone gets their fair share if a bank fails," Schwartz said.

The discussion highlights the complexities involved in keeping crypto safe. While exchanges like Coinbase offer convenience, there are inherent risks that users should be aware of. Before entrusting an exchange with your crypto, it's advisable to conduct thorough research and fully understand the potential consequences in the event of a worst-case scenario.

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