Ripple CTO David Schwartz has highlighted the potential dangers of storing crypto on popular exchanges like Coinbase. He addressed these concerns in response to queries about the safety of digital assets.
Schwartz explained that while FDIC insurance covers cash if a bank fails, it does not protect funds if an exchange goes bust. If Coinbase were to fail and the bank holding the funds could not cover everyone, users would be out of luck.
The discussion began with a question about FDIC insurance for USD on Coinbase. Schwartz clarified that FDIC insurance only applies to cash held in banks, not to the exchange itself. This means that in the event of an exchange collapse, users’ crypto assets could be at risk.
When someone mentioned the possibility of Coinbase using FDIC-insured banks to hold users’ USD separately, Schwartz agreed it could work. However, he stressed the importance of Coinbase maintaining accurate records to ensure fair distribution of funds if a bank fails.
This conversation underscores the complexities of keeping crypto safe. While platforms like Coinbase offer convenience, they also come with risks. It is essential for users to understand these risks and do thorough research before storing their digital assets on exchanges.
Schwartz’s comments serve as a reminder that, despite the benefits of using exchanges, there are still significant risks involved. Users should stay informed and consider all options to ensure the safety of their crypto investments.
