The world of cryptocurrency is founded on the principles of ownership and moving beyond centralized systems. While this offers a huge range of benefits, it also means that cryptocurrency exchanges are not secured by the FDIC’s protection deposits. Normally, if a banking system were to fail, its users are protected for up to $250,000. This simply isn’t the case with crypto exchanges.
With over 98 million verified users and billions in controlled assets, many thought of this institution as simply too big to fail. Yet, things aren’t looking good for Coinbase, with their recent announcement suggesting that they may soon have to file for bankruptcy.
Will it stay up? Or come crashing down?
To make matters worse, due to the lack of regulation within decentralized systems, if Coinbase fails, all of the money on the platform that was invested by users into cryptocurrency may also be hanging in peril. This could technically mean that millions of Coinbase users around the globe may lose access to all of the money they’ve invested in cryptocurrency.
There are a range of personal wallets that users can turn to, transferring their exchange-centered wallets to a system where they will always have access. The vast majority of these wallets are accessed by using a browser extension, providing an easy way of accessing them when online. A huge part of what’s causing this situation to spiral so quickly is the fact that the US government has not had to deal with a cryptocurrency exchange going bankrupt, meaning a whole plethora of financial and legal questions have begun to arise.
Many users that haven’t used a personal wallet before may find this process confusing, especially when trying to transfer their funds from an exchange. Equally, browser extensions are notoriously unsafe, as they lack a large amount of regulation that other platforms have to surpass.
Due to the mix of ease and providing a more secure way of holding your cryptocurrency, other services have arisen that aim to provide crypto-beginners with a more straightforward way of creating and using a personal wallet. Ambire is one of these.
What We Think
While the decline of Coinbase is a point of worry for cryptocurrency investors, this event has also made investors around the globe realize that they need to be more careful about how and where they’re storing their digital assets. No matter how much someone has invested into cryptocurrency, if they’re doing that investing from a wallet hosted on a decentralized exchange, then their accounts will be treated as collateral of the service they use.
Those interested and invested in blockchain should take the case of Coinbase as a warning and start to take preventative measures to secure their investments. By opening up a personal wallet, you’ll be able to have complete ownership of any investments that you make, ensuring that your money stays in your wallet and in your control.