Crypto Assets in a Coinbase Account: What Happens to Them?
Many use platforms like Coinbase to buy, store, and stake digital assets. Naturally, you may get curious about what happens to these assets, especially when they are held or staked on Coinbase.
The Crypto Accountants explain in the simplest terms what happens to crypto assets held in a coinbase account. We will discuss how secure your assets are and what happens if something goes wrong with the platform.
What Happens to Crypto Assets in Your Coinbase Account?
When you hold crypto in your Coinbase account, the platform acts like a secure vault for your digital assets.
Coinbase keeps your assets safe in what’s known as a hosted wallet. Even though Coinbase holds the keys to your wallet, the assets always belong to you. That means Coinbase has no right to use or move your funds.
They are required by law to keep your funds separate from their own.
Security Measures
Coinbase uses several safety measures to protect your crypto. They store most of your assets in “cold storage.”
It means your assets are kept offline, which protects them from hackers. Additionally, Coinbase uses advanced security technologies like multiparty computation (MPC) to protect your wallet.
This system ensures that no one person or entity can access your private key, further protecting your assets.
What Happens If Coinbase Goes Under?
What happens to my crypto if Coinbase goes under? Now, that’s a very genuine concern!!
But let us assure you! If Coinbase runs into financial trouble and goes bankrupt, your crypto assets remain yours.
Coinbase is regulated and required to keep customer funds separate from the company’s own assets. Your crypto will not be used to pay off Coinbase’s debts. However, there may still be delays in accessing your assets in such an event.
What Happens When You Stake Crypto on Coinbase?
Staking Overview
Staking is a process where you help validate transactions on certain blockchain networks, and in return, you can earn rewards.
When you stake crypto through Coinbase, your assets are locked into the network to help it run. In exchange, you receive a share of the rewards generated by that blockchain.
Staking Risks and Rewards
Staking can be a way to earn passive income, but it’s not risk-free. One potential risk is something called “slashing.” This happens if the blockchain network has an issue, and part of your staked assets can be lost as a penalty.
However, Coinbase works with reliable and stable blockchain networks to reduce these risks.
How Coinbase Handles Staked Assets?
When you stake your crypto with Coinbase, your assets are still yours, even though they are temporarily locked in the staking process. You will receive staking rewards directly to your account.
While the assets are staked, you generally cannot move or trade them until the staking period ends or until you “unstake” them.
What to Expect When Staking?
If you opt into staking on Coinbase, the process is generally straightforward. Coinbase handles the technical aspects, so you don't need to know in-depth how blockchain networks work.
You can easily monitor your staking rewards and track how much you have earned.
Final Thoughts!
Coinbase provides a secure environment for holding and staking crypto assets. Staking on Coinbase can be a great way to earn rewards, but it also comes with some risks.
Coinbase does its best to minimize these risks, and you still retain ownership of your assets whether you are holding or staking them.
If you are hesitant and need more information, reach out to the Crypto Accountants.
FAQs
What rights does Coinbase have over crypto assets in my account?
Coinbase holds your assets but doesn’t have the right to use them. They simply store them in your wallet for you.
Is it safe to keep my assets in Coinbase?
Yes, Coinbase uses advanced security methods like cold storage to protect your assets, but no system is 100% risk-free.
Can I lose my crypto on Coinbase Wallet?
Your crypto can be lost if there’s a hack or security breach, but Coinbase’s protections help minimize this risk.
What happens after you sell crypto on Coinbase?
Once you sell crypto, the funds will appear in your account as cash, which you can withdraw or use for future trades.