A while back, a statement from an official doc of Coinbase showed the true side of centralized exchanges. It said that in case of bankruptcy, users might lose the crypto on the exchanges. However, to show that it is not the case with every exchange, Binance promises user refunds first if the company goes bankrupt. The CEO of the company said that refunding users before shareholders would be the priority.
Binance prioritizes users over shareholders
Binance’s CEO recently had an ask me anything session where he discussed different topics like resuming Luna’s trading, the future of the BNB chain, or how they handle user funds. As you would expect, users were most interested in the last question as it directly relates to their money. CZ said that Binance doesn’t mix user funds with the exchange’s operational funds. So, it’s not as if something goes wrong, and Binance’s users will lose everything.
This is unlike Coinbase, which recently said in its earnings report that “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” Even though it is not a 100% guaranteed thing, the apparent risk is there because the exchange is mentioning it. Coinbase also said that it would consider its users’ general unsecured creditors. In other words, they will lose their funds and have no power to do anything about it.
As users, what should you do?
If you are using Coinbase and have anything over $300 on the exchange, then consider getting a hardware wallet. Why $300? Because a good hardware wallet might cost you $100, if you have less than $200 in Coinbase, it doesn’t make sense to buy one. After what they said in their earnings report, I cannot recommend anyone using the platform to hold their tokens. It’s often said in crypto, “not your keys, not your coins.”
As for Binance, it does seem safer as the CEO has openly said that they would not take user funds but again, having a hardware wallet is always the safest. The chance of Binance going bankrupt is also lesser than Coinbase.
What are your thoughts as Binance promises user refunds first if the company goes bankrupt? And do you think Coinbase should also take a similar step? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
Also Read: Crypto.com announces a donation for the study of security and privacy.
