Today I [SERIOUS]ly read the Terms and Conditions of Binance, Kraken and Coinbase

After a judge has ruled that customer's assets do not belong to them based on the bankrupt-firm's Terms of Service (ToS), I decided to check how deep we could go were one of the exchanges in the title to fail. I was looking specifically for insurance and/or ownership of the assets. See the TL;DR at the end.

Binance

Binance's ToS have no mention of “ownership” or “insurance”. When trying to search the page for these, nothing relevant comes out. Some things, though, got my attention:

https://preview.redd.it/ss7asen0ugaa1.png?width=1232&format=png&auto=webp&s=ad7362dac89410f81d9a100604117d9913a1c94e

They claim not to have any obligation towards us when we're using their services. In addition, no communication shall be implied as Financial Advice, not even the spam emails they send you encouraging you to use leverage [sic] because you could “gain 10x your investment”.

Other point that caught my eyes was:

https://preview.redd.it/ig0876qltgaa1.png?width=1253&format=png&auto=webp&s=e8738c3c5df67ac4c528f4293af9505040ce3bf0

I mean, why would they not warrant that their services are accurate and reliable?

Kraken

When it comes to ownership, they're very clear: the assets are yours! The word Payward refers to Kraken themselves:

https://preview.redd.it/mnlu6yxjugaa1.png?width=666&format=png&auto=webp&s=fd51bab7596cab70a15c76ff923ac22eb0e90949

However, the assets are not insured or covered for losses:

https://preview.redd.it/jtddss8vugaa1.png?width=690&format=png&auto=webp&s=5c15f0d3df3e336a421d7053043b8172aef4352b

A question I have here: does this mean that if the exchange goes bankrupt by e.g. a hack, a judge and/or lawyers could claim that the losses are not Kraken's fault, and therefore you'd be left without your assets?

Kraken also takes no responsibility for losses in the following cases:

https://preview.redd.it/n4l0g4xcvgaa1.png?width=704&format=png&auto=webp&s=5cdf5637f0bc56b94a20aab9e594da524e2af2b0

Coinbase

Ownership belongs to the users:

https://preview.redd.it/rgqtv2qawgaa1.png?width=927&format=png&auto=webp&s=35e0ba51675f5bbf806695c73633c2a95831de05

Contrary to Binance and Kraken, user assets are insured by up to $250,000, as long as they're in USD (cash) format within your wallet:

https://preview.redd.it/n16qj73jvgaa1.png?width=935&format=png&auto=webp&s=f0fd5840e9a69070c53453ad0458d69dbbcfe397

Funnily enough, one of the insurers is no one else than JPMorgan Chase:

https://preview.redd.it/vnu779nrvgaa1.png?width=1428&format=png&auto=webp&s=89097fd1c8d22ae3b0148ee2e156217b7c7eef86

A portion of your assets are insured against theft (at Coinbase's end, not yours) and such:

https://preview.redd.it/9i7ul4mxvgaa1.png?width=1422&format=png&auto=webp&s=8f680fa518be3b23c72418c21ecb78c68e81b5fb

I could not find information on what's the % of this portion.

They're launching Coinbase One, where you pay a subscription to a VIP-like access to benefits, which accounts for an insurance of up to $1M US dollars on the assets on your wallets:

https://preview.redd.it/qp8vjtk8wgaa1.png?width=938&format=png&auto=webp&s=bea5709772a4743065f97408c22f8de8db141c92

TL;DR

  • Kraken and Coinbase acknowledge that assets belong to users
  • Binance does not say anything on ownership (at least not that I could find)
  • I only found insurance information on Coinbase: all balance held in USD (fiat) is insured by default and up to $250,000, or up to $1M dollars for assets in fiat and crypto for Coinbase One users

I was not expecting to see any kind of insurance at all, and am surprised with Coinbase's take on that. Binance was the one with the less amount of information on these topics (at least per my research).

I'm not sure to what extent the assets would still be considered users' property in the case of a bankruptcy filing, though. Exchanges can change their ToS at anytime, so avoid leaving funds there for longer.

50 thoughts on “Today I [SERIOUS]ly read the Terms and Conditions of Binance, Kraken and Coinbase”

  1. Standard procedure. Assets deposited in a bank, hedge fund, broker, crypto exchange, credit union are property of the business. In the event the business fails, all creditors are paid first. Depositors second. The only financial institution where this does not apply is a trust company.

  2. unpopular opinion:

    I trust Coinbase. I’m fine leaving some on there because it’s a hedge against myself.

  3. Coinbase One insurance sounds very compelling then, especially for the additional discount on trading frequently

  4. Great info 👍

    So glad I’m so close to my bag goal. Going to order a cold wallet at the end of the month and never worry about coinbase or binance going out of business and taking my hard earned money 💰 with them.

  5. Even if the terms support you, things can go south fast because of some idiot judge. Better to be safe and protect your money in your wallets. Also the APY exchanges offer is not worth the risk.

  6. SBF wasn’t co mingling costumers funds according to his terms of service and still lost the money so il say this the system cant be fixed, because it was designed to take your funds wether its banks bail outs bank bail ins or crypto exchanges, stock brokers, regulation by enforcing.

  7. Sometimes a physical metaphor helps.

    If I borrow your car, it is still yours.

    If I then lend your car to someone else, and they crash it, or ride it off into the sunset, or paint it purple, you can come after me and at least recover the amount of the value of your car. Assuming I have that value on hand.

    If I can’t pay my debts to you and I am bankrupt, good luck getting your car back. Or even the value of your car back.

    The point here is not who owns the assets per-se, but also the rights that you give to others when you hand them to them for “safekeeping”. If they can lend or hypothecate, ownership is not a protection.

  8. If the exchange goes out of business or goes bankrupt, you are at risk of losing or partially losing your funds. If they go bankrupt, the exchange will pay off the creditors first and if there is anything left over you might get a partial settlement.

    Coinbase states in their ToS that if they go bankrupt, your funds are theirs.

    I do keep a small bag on Coinbase but its only an amount I can afford to lose. If I trade on an exchange and am finished trading, I’ll move the crypto to a cold wallet.

  9. For those thinking “ah I’m safe with X they recognise my crypto as my assets” FTX TOS also stated peoples crypto belongs to them but that didn’t stop them playing with your funds and committing fraud. Also terms can and do change …often as what happened with Celsius.

  10. This is why Coinbase failing is the worst outcome possible. They are the only one doing the modestly right thing on behalf of their customers in this space. Kraken of sort does but could be a lot better.

  11. This is why i feel somewhat comfortable leaving small garden variety holdings on CB.. Though i do understand the importance of self custody and of course it is a necessary component in utilizing defi and the networks.

  12. This is an excellent write up thank you for sharing and already post of the year material.

    I have already made the move to take everything off Binance and stash in ledger, even if doing nothing sitting there not earning a dime. Its clear right now there is zero safe guard if any exchange fucks up in any way. No ruling or precedents set so its a crap shoot, not willing to have sleepless nights over that.

  13. Don’t they always add the caveat that the User Agreement can be updated at any time? Thats their get-out-of-jail card.

  14. Thank you for this service, you may have saved one of us (or more) from an FTX-like loss in the future.

  15. In the event of Binance’s collapse, what would happen to everything on the BSC? I’m looking at storing stuff in a non-exchange wallet (y’know, Trust, Metamask, or cold).

    When you send from Binance, you can choose what network it is. Eg you can send Jasmy out of Binance as Eth, or BSC. If Binance crumbles, what happens to the BSC? What happens to the functionality of that network? Does it go down too? Or is it at a point where it kinda runs itself? Does the BSC get affected at all if Binance closes down? Or are there enough nodes around the world to keep the thing running?

  16. Nobody in any terms of service guarantees reliability of their services or that they are virus free…go read Facebook tos

  17. For years the crypto community (especially BTC maxis) have been hating on Coinbase but now we know that they are much better than Binance.

    Binance locked my coins because of an error on their part only to admit later they were wrong. Coinbase never gave me any problems.

  18. It should also be said, Coinbase is a publicly traded company now, and it has a duty to it’s shareholders. It has more incentive to please customers and shareholders than private institutions.

  19. Whatever decision you decide to do in any part of life take accountability for your actions.

    A lot of the people in the sub I can guarantee you touched the hot stove more than once 🤷🏽‍♂️

  20. I’ve always “trusted” Coinbase over the other exchanges. Binance and Kraken just seemed so sketchy to me while I did my research before picking an exchange.

  21. Great post. Thanks for taking the time, after reading a bulk of it myself it seems Binance looks like the shady character here. With no garentees they are t “owning” “lending” our assets without a clear statement similar to kraken/coinbase

  22. I’m believe that Coinbase stated that funds in their “vault” we’re protected and insured many years ago. And I had left some fund in the vault for like 5 years at one point and when I came back they were still there.

  23. It is a very serious topic and once again people have to use the exchanges for selling and/or buying, not as a deposit and have to self custody their own assets.
    Remember: not your keys, not your money.

  24. Not even surprised. Coinbase seems to try to look legit as possible while Kraken is pretty much the “You guys are all degenerate gamblers, we won’t stop you but we aren’t trying to steal from you or protect you” of crypto exchanges.

    Meanwhile Binance is engaged in massive amounts of illegal behavior.

  25. Same thing in banks, in case of bankruptcy you don’t get anything from them.

    At least this is the case in my country, don’t know about other countries

  26. Happily paying my $360/yr to coinbase for this insurance. 0% fees on your first 10k of transactions each month pays for itself too. Don’t get me wrong, I hate corporate, but Coinbase deserves the credit when they are in direct competition with scams.

  27. I can’t copy/paste because I’m on mobile and it’s from one of your screenshots, but this is kind of a case of knowledge without expertise. You put a lot of effort into this but it’s almost meaningless because the common law of the jurisdiction likely ousts parts of the contract.

    Note the part you didn’t highlight on Krakken where they make no warranty that your funds are held free and clear of any security interest by Krakken’s creditors. So their “your funds are yours” is basically lipservice as a court may deem them to be subject to security interests of Krakken’s creditors. They explicitly acknowledge this, which is nice, but it also makes a lot of their previous assurances fairly meaningless. To get a real answer here you’d want to know who Krakken’s creditors are, what amounts they’re for, and what security has been pledged to get that credit. And even then you’d want to know about the law in Krakken’s jurisdiction related to seizure of assets by creditors where the assets’ apparent beneficial owners were on notice of this term and so probably couldn’t avail themselves of the “without notice” protections given to owners who could not have anticipated someone else making a claim over their assets.

    The short answer is that these entities either fall within financial regulatory umbrellas and are subject to the applicable regulations and relevant caselaw interpreting them, or they aren’t and you’re in the wild west, with chances to lose your money whether the exchange wants you to or not, in an action by their creditors which could both freeze and with court authority withdraw your funds for their benefit.

  28. Who would even end up holding large quantities of USD on an exchange like Coinbase though? Seems it would apply to only a tiny percentage of users.

  29. It looks like i’m in the minority here because I have always been told to never leave money on an exchange “not your keys not your crypto “. My whole belief was that decentralisation is the way forward however this post seems to want centralised security.

    Before anyone tries to explain what this means I can read and fully understand, this is just my opinion on the whole issue. I use hardware wallets and if I wash to stake I’ll take a small and transfer that to the exchange, if the exchange goes bankrupt tomorrow my losses are minimised,

  30. Well I’ve always been with binance cause they’re user friendly with good prices. But after your information (thanks for researching!) I may be moving to kraken soon.

  31. It’s these kinds of small details that can boost confidence for those investing in crypto and exchanges. Kraken and Coinbase are clearly leading the way in making crypto in general safer for the average person, take heed Binance and all the rest and follow their lead! Do the same or you deserve to be left behind

  32. Fine print like this should be eliminated, because it often contradicts the main advertising message. For example, a company may advertise that their product is safe, but the fine print may qualify this by saying that the safety is not guaranteed. This practice of using fine print to qualify or contradict the main message is misleading and should be stopped.

  33. It’s still not a true 100% guarantee though, even when an exchange has these kinds of declarations in place. If they go bankrupt for example a judge could try to ignore this as it is not an established precedent.

    But its still obviously much to Coinbase’s’ and Kraken’s credit for making this kind of effort, which is more than can be said for others

  34. Kraken Germany has the same FDIC type of insurance (“Einlagensicherung”) for EUR deposits as German bank/checking accts (100k), I know as a fact some years ago. Thanks for reading/posting this info though!

  35. Dear Crypto User-

    You’re not supposed to read that shit. But since you did, we want to remind you that it wasn’t necessary for you to read our Terms and Conditions Agreement. In fact, please discontinue.

    Thank you. We are so glad that you did not read what was originally meant for our eyes only. But more importantly there is no delving deeper into our policies that may or may not affect you, and the fact that your money is now ours and this policy clearly states this absolutely insane agreement.

    Now, please click “accept”.

    And then move on. And thank you for being a valued customer.

    Signed,

    Nonya Business

    Customer Service

  36. I’ve fallen in love with Kraken in recent weeks. A simple crypto on ramp that allows immediate withdrawals to self-custody wallet.

  37. Loving all the comments. It comes down to have you read and understood the t&c’s regarding liability? Good. Because it’s mostly yours. It matters not at all that they acknowledge the coins or fiat is yours. If they have no coins or fiat left, you don’t get any back. Yes, they are liable, yes it’s owed to you, no they don’t have it to give to you, so tough shit. Hopefully they go to jail. No, you still don’t have your coins/fiat back, and you likely never will.

    Insurance is different. Now you can get it back, because the insurers owe you, not the bankrupt exchange. But you better check carefully, because I’ve NEVER read t&c’s that cover coins and asset’s, only fiat.

    Use exchanges for exchanging. Nothing else.

    Exchange your fiat for crypto, buy what you want, then take control of it by securing it with a cold wallet.

    Never, never, never trust an exchange to be a bank. FFS, we only have crypto because the government backed-with-guarantees banks cannot be trusted. Why would you trust a crypto “bank” that doesn’t even have that?

  38. I’ve heard very good things about Kraken, and I’ve always liked Coinbase. There’s a reason (or likely, many) that Binance has issues with regulators though. To be perfectly honest, I don’t trust them and can very much see them going boom at some point. Given how huge they are, that could destroy the crypto market with it.

    I’d be interested to see what Crypto.com says though. Not sure if you’d be interested in doing a follow-up post with them?

  39. Thank you OP for spending the time in making this post and providing such in depth analysis which many of us may well have overlooked or simply not been motivated enough to go through with such a fine tooth comb.
    It’s an affirmation to me that Kraken (which I choose over CoinBase personally) was a good choice.

    What with recent events and exchanges hitting the headlines it’s bound to put off the average person who is just starting out in crypto. Kraken (and CoinBase to be fair) are at least clearly making a gallant attempt at doing everything they can to protect their prospective new and existing customers.

  40. OP thank you, you’ve just swayed me in ditching Binance altogether and moving to Kraken based on this.

  41. So funds on the crypto exchange are insured as long as they are not crypto but US dollars? Did I get it right?

  42. Absolutely unsurprised to see Binance’s T&C’s make it abundantly clear that you don’t own your coins on their exchange (or your fiat) and that they do whatever they want with them.

    Shady as fuck, get your shit off Binance.

  43. Do we think binance is going to change and become fdic insured in the future? since it is a CEX and so many people don’t claim their crypto on taxes. If they did intertwine more with the government giving them more standing (not with the people), they could/would offer fdic insurance

  44. Since a judge has ruled that I gave those assets to Celsius when I transferred them, can I now write them off on my 22 taxes?

  45. Please don’t take screenshots of text. That’s what the quote tool is for.

    It’s not just invisible for some apps, but it’s invisible to blind folks who can’t use accessibility tools to read the text.

  46. Not sure if anyone has ever thought about this. But might be worth withdrawing your crypto into a wallet? We could come up with a catchy phrase like ‘not your keys, not your crypto’ to make newbies understand the importance of managing your own funds and not relying on a third party

  47. it’s amazing to me how, from all the popular (and remaining) crypto CEXes, Binance is both the largest and the worst, it doesn’t make sense; it’s in true crypto spirit, sometimes reason and common sense are just not part of the equation

  48. Back when I was first getting into crypto back in 2017

    I felt coinbase was pretty safe

    I also felt binance was safe as well but I didn’t use it cause it was bit of hassle compared to the other two at least for me it was a hassle

    I didn’t put too much trust into kraken since we couldn’t use USD so I had to transfer money into coinbase convert to btc and then transfer that to kraken.

    Turns Kraken and Coinbase are doing good while binance is doing well its not as safe as the other two.

    Having said this tho. A few months back coinbase hired a bunch of developers and set a start date and then revoked it a few days before start date so I’m still fully unsure if I trust Coinbase

  49. You highlighted the point on kraken that says the title to the digital assets remain yours “except as provided herein”. Meaning there’s exceptions. One that pops out is that a court may still rule that the assets do not belong to you and instead belong to their creditors.
    Same with Coinbase.

    So basically we have to trust in this case that courts would rather protect the public and individuals than business entities. Which history tells us is less likely.

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