Coinbase, Inc. (“Coinbase”) stores customer U.S. Dollar cash in Federal Deposit Insurance Corporation (“FDIC”)-insured bank accounts, National Credit Union Share Insurance Fund (“NCUSIF”)-insured credit union accounts, and in short-duration, liquid investments like U.S. government money market funds to keep it safe and liquid. All customer cash is held 1:1, meaning your assets are your assets. Coinbase does not lend or take any action with your cash unless you specifically instruct us to.
Coinbase Inc. also holds cash for customers of Coinbase Capital Markets. Cash related to equities accounts at Coinbase Capital Markets is provided the same protections as cash for other customers of Coinbase Inc. and is not subject to Securities Investor Protection Corporation (SIPC) coverage.
Coinbase takes additional steps to ensure customer cash is always secure. Coinbase uses three categories of controls overseen by Coinbase’s finance team and risk committees:
Books and records
Risk management
Business continuity
Books and records
Coinbase properly segregates and maintains records for Coinbase corporate and customer cash. There is never a situation where customer assets could be confused with corporate assets.
Coinbase corporate cash used for corporate expenses sits in bank accounts titled “Coinbase, Inc.” (or another Coinbase entity).
U.S. customer cash (plus some cash Coinbase contributes for operational reasons) sits in omnibus accounts titled, in effect, “Coinbase Inc. FBO its customers.” The “FBO” means “for the benefit of” and tells our partner financial institutions the cash belongs to our customers.
Coinbase maintains internal ledgers as an official record of how much cash each customer holds. These records are required to secure pass-through FDIC insurance and/or NCUSIF insurance for customers in the event of failure of the partner financial institution.
Coinbase’s cash management practices are subject to internal audit, third party independent audit, and regulatory review.
The Internal Audit team performs periodic internal audits over Prime and custody operations, including cash management and supporting systems.
An independent third-party auditor performs periodic SOC 1 Type II attestations of Coinbase Prime.
Coinbase’s parent company’s financial statements and disclosures are available through periodic filings on a quarterly basis, and compliant with annual audit requirements of Article 3 of Regulation S-X.
Coinbase’s cash management practices are subject to regular examination by various state banking departments as a condition of maintaining money transmitter licenses.
Risk management
Coinbase has policies and procedures that dictate where and how customer cash is held, including insured depository accounts for crypto cash balances.
Coinbase regularly conducts thorough reviews of counterparty risks, including of the financial institutions used. Coinbase dynamically manages our deposit limits per financial institution at the aggregate level. A list of the insured depository institutions at which Coinbase deposits customer funds can be found here. Coinbase’s procedures have been developed to ensure that if one of Coinbase’s financial institution partners fails, Coinbase’s internal ledger records would tell the FDIC or NCUA exactly how much of each FBO account belongs to each customer. Coinbase’s systems automatically reconcile that ledger to statements daily.
Customer protections
A customer’s deposits in the aggregate with an insured financial institution are protected up to $250,000 by the FDIC or NCUSIF, as applicable, in the event of the financial institution’s failure. This means that if a customer maintains cash deposits at an FDIC- or NCUSIF-insured financial institution independently of the cash amounts the customer stores with Coinbase and that Coinbase deposits with the same financial institution, the customer will be protected for losses up to $250,000 in the event of the financial institution’s failure.
Cash custody
Coinbase has internal limits on cash held at financial institutions that can reduce exposure further. If customer cash (U.S. Dollars) deposits exceed the amount Coinbase may allocate to these banks or credit unions, Coinbase may allocate the amount over the internal limits into short-duration, liquid investments following state money transmission laws. These investments could include U.S. Treasuries and U.S. government money market funds. These money market funds invest in high-quality, short-term securities issued or guaranteed by the U.S. government. The funds comply with Investment Company Act Rule 2a-7, which means at least 10% of their assets can be converted to cash in one day. In fact, typically about 80% of the funds’ assets have daily liquidity. And, again, the investments are in accounts titled, in effect, “Coinbase FBO its customers,” to make explicit that these are customer assets. Cash could be held at financial institutions or in permissible investments under money transmitter laws, so customers should not assume that cash is being held in one manner over the other.
Business continuity
Prudent risk management is at the core of Coinbase’s business and product design. Coinbase plans for business continuity in the event of partner financial institution service disruptions. While Coinbase has confidence in its bank and credit union partners, it maintains contingency plans and redundant payment rails to ensure service to customers can continue and customers have access to their cash stored with Coinbase, even if changes occur with financial institution partners.