Is Coinbase Safe To Use?

The Bottom Line

Coinbase has built a reputation as a safe platform because of its commitment to compliance, regulatory oversight, fund protection strategies and an unblemished track record of no security breaches. The company is also publicly traded, adhering to stringent financial reporting requirements. 

Coinbase Platform Security Features Explained

Coinbase takes security seriously, implementing multiple layers of protection to safeguard your assets. Here’s a breakdown of key security features you should be aware of.

1:1 reserves

In contrast to certain exchanges exposed for using fractional reserves, Coinbase guarantees that it maintains a 1:1 ratio of customer assets. This indicates that you can withdraw your funds anytime, ensuring their constant availability. 

This approach mitigates liquidity risks and diminishes the likelihood of a collapse reminiscent of a bank run.

Collection of (necessary) personal data

Coinbase operates as a regulated exchange that adheres to Know Your Customer (KYC) and Anti-Money Laundering (AML) standards. 

Although some might consider this intrusive, it is a security measure that helps thwart fraud, money laundering, and unauthorized access. 

Verifying your identity makes it more difficult for criminals to open fake accounts and participate in illegal activities.

Industry-leading encryption 

All sensitive user information on Coinbase is secured with AES-256 encryption, among the most robust encryption standards. 

Moreover, private keys are kept in offline cold storage distributed across various geographic locations, ensuring that your assets would still be safeguarded even if a database breach were to occur.

2FA

Coinbase mandates two-factor authentication (2FA) for all users, allowing you to choose between SMS-based verification and a more secure option, like an authenticator application. 

Due to previous vulnerabilities associated with SMS, selecting app-based 2FA, such as Google Authenticator or Authy, is strongly advised for enhanced security.

Password protection

Coinbase mandates the use of robust password criteria and prohibits the use of simple or frequently used passwords. Nonetheless, security also falls on you – it's essential to create a unique, strong password and keep it stored safely to ensure the security of your account.

Coinbase Vault multi-approval withdrawals

For those who have held cryptocurrencies for a long time, Coinbase provides a Vault feature that enhances withdrawal security. 

By using the Vault, you can establish time-delayed withdrawals and implement a requirement for multiple approvals, which guarantees that even if someone accesses your account, they cannot instantly deplete your funds.

Has Coinbase Been Hacked?

Although Coinbase has not experienced a significant breach jeopardising its overall security, individual users have faced targeted attacks from hackers. These situations often arise from phishing schemes, SIM swapping, and various social engineering tactics that exploit vulnerabilities outside Coinbase's influence.

A particularly notable instance involved a SIM-swap attack in which hackers took over $11 million from several Coinbase users. This incident was not due to a failure in Coinbase’s systems but rather a manipulation of insecure mobile carrier protocols, enabling attackers to access victims' accounts.

You might be interested in this: Cryptocurrency Exchange Hacks (Updated List For 2025)

Furthermore, in 2021, over 6,000 users encountered an exploit where attackers circumvented SMS two-factor authentication because of a flaw in Coinbase’s SMS account recovery method. Again, this did not indicate that Coinbase had been breached, but it underscored the dangers of relying on SMS for security. 

Following this event, Coinbase took action by compensating those impacted and strengthening its security measures.

How Coinbase Users Can Stay Safe

Even with all of Coinbase’s security measures, your safety ultimately depends on how well you protect your account. Here are some best practices to ensure maximum security:

• Use a Hardware Wallet for Large Holdings – If you hold significant amounts of crypto, consider moving your funds to a hardware wallet like Ledger or Trezor. Keeping assets off an exchange reduces exposure to potential hacks.
• Enable App-Based 2FA – Avoid SMS-based authentication and use a dedicated 2FA app to prevent SIM-swapping attacks.
• Beware of Phishing Scams – Always double-check URLs before logging into your Coinbase account. Avoid clicking on email links that ask for sensitive information.
• Regularly Update Your Passwords – Use a unique, complex password and store it securely in a password manager.
• Set Up Whitelisting – Coinbase allows you to whitelist wallet addresses, meaning withdrawals can only be sent to pre-approved addresses.
• Monitor Account Activity – Regularly check your login history and authorise withdrawals only from trusted devices.

Conclusion

Coinbase is one of the most secure cryptocurrency exchanges, yet no platform can claim to be completely free from risks. Although it has never been directly compromised, some users have experienced losses due to social engineering schemes and vulnerabilities related to external factors like SIM swapping. 

Nonetheless, Coinbase's strong security features—such as 1:1 reserves, cold storage, robust encryption, and two-factor authentication—distinguish it from less trustworthy exchanges.