In the last few days, several customers of the crypto exchange Coinbase have complained about having their accounts restricted, sometimes without reason.

Just as Bitcoin and the entire crypto sector are at all-time highs, the main US trading platform is applying heavy restrictions to its users.

The Coinbase team intervened on X to clarify the matter, leaving, however, an unpleasant bitter taste.

All the details below.

Various users complain about restrictions on the crypto exchange Coinbase

For a few days, a wide range of users have been reporting on X that they have experienced unreasonable limitations from the crypto exchange Coinbase.

Many accounts have been blocked, or cannot send crypto outside the platform, despite there being no violations of the terms of service.

Some of the people affected by the unfortunate incident are long-time customers of Coinbase and have 6-figure wallets.

The news arrives at a delicate moment for the crypto market, with Bitcoin having just surpassed the key threshold of 100,000 dollars.

Hey @coinbase and @brian_armstrong why am I restricted from my 1.2 million on your “debanked app” ? pic.twitter.com/YWurFe6E3k

— Bullish (@TheBullishTradR) December 5, 2024

Users report having contacted the exchange’s customer service asking for explanations, but they have received only misleading answers.

Furthermore, the waiting times for contact with the dedicated help center turn out to be very long, sometimes exceeding 5 working days.

For example, the user “Johnny Zcash” reported being restricted in crypto transfers, despite his 12-year history on the platform and a 7-figure wallet.

After trying to send hundreds of messages to Coinbase support, he managed to only partially unlock the block, which has now been going on for 9 months.

Entering into the details of the incident, the head of security of the rival exchange Kraken, Nick Percoco, attacked Coinbase by writing the following:

“You are making some of your users choose between financial freedom and physical safety”.

Other industry experts, such as Taylor Monahan, lead security researcher at MetaMask, have leveraged the inefficiency of the exchange’s customer support:

“I am glad to know that Coinbase places such a high priority on work-life balance. “Because, as we all know, cryptocurrencies operate from 9 to 5 PT from Monday to Friday and no one victimizes your users even outside those hours”.

The exchange Coinbase responds to the accusations by invoking FUD and misinformation

Following the rain of insults against Coinbase, the team of the exchange decided to speak out on X, explaining what was happening.

In a detailed thread, the platform’s managers invited their users not to fall into the FUD and to ignore the widespread misinformation circulating online.

4/ This is causing a minor increase in restricted accounts and elevated CX wait times. Please bear with us and don’t believe everything you see on twitter.

— Coinbase Support (@CoinbaseSupport) December 8, 2024

The reason for the blocking of some accounts concerns the increase in fraud attempts in recent weeks, which has required a stricter KYC check than expected.

Post USA elections, there has been a massive reactivation of accounts that have been inactive for months, and with it an increase in attempts to falsify customer support.

Various hackers are therefore trying to take advantage of the renewed interest in crypto, and Coinbase is conducting more checks than usual.

A factor in particular that seems to have caused unjustified restrictions has been the detection of VPN or Ad Blocker coverage.

According to what was reported by Scott Shapiro, product director of Coinbase, since attackers always use VPNs, the risk models of the exchange consider this presence a negative sign.

For this reason it is not recommended to apply a virtual private network (VPN) when interacting with Coinbase or with other centralized services.

In any case, the terms of service do not explicitly mention the use of VPNs, and some users even claim to have no issues with specific types.

PSA: Don’t use a VPN to access Coinbase.

Attackers always use VPN’s, so our risk models take that as a negative sign even if you’re legitimately using your own account.

— Scott Shapiro 🛡 shapiro.eth (@scottshapiro) December 2, 2024

In a follow-up thread, Shapiro then clarified that the use of a VPN alone would not cause the reporting of a Coinbase account.

Here is what the IT expert wrote:

“These tools in combination with other factors, such as access from an unknown device from a new country attempting to send a large amount of cryptocurrencies to a new address, can trigger a false positive that requires further security review”.

Custody of crypto on exchanges: a convenient but very risky practice

We take advantage of this situation to remind once again how harmful it can be to store crypto within centralized exchanges like Coinbase.

Despite platforms like this offering a simple and accessible means for everyone to invest in digital assets, they can prove to be a double-edged sword.

In the midst of a bull market, several users boasting record profits are unable to trade or cannot cash out, citing the reasons listed above.

Even though they are right, they have to spend entire days talking to Coinbase customer support dealing with tedious and lengthy KYC recognition procedures.

Coinbase freezing people’s money more than normal banks ever did is such a hypocritical situation

— DANIEL GOT HITS (@danielgothits) December 8, 2024

The main problem is not the increase in scams or the improper use of VPNs, but the fact that to store crypto, one relies on a fiduciary intermediary.

The irony is that cryptocurrencies were created precisely to bypass these figures in the traditional world (often identified as banks).

By relying on an exchange, one agrees to lend their private keys to someone we do not actually know.

The platform in question only gives us the possibility to use the same private keys in a completely arbitrary way, in varying ways and times.

As the old sage says: NOT YOUR KEYS, NOT YOUR MONEY.

Cryptos are no longer at our complete disposal if we deposit them on an exchange.

Those who have not already learned will learn in due time at their own expense.

🚨 Exchanges can freeze your funds, go down anytime and mismanage assets.

Don’t get caught out by one.

Self custody, only use an exchange if absolutely necessary and NEVER store your crypto there.

— Crypto Tips (@cryptotipsreal) December 9, 2024

Self custody is not for everyone

Despite the recommendations on the risks arising from custody on exchanges like Coinbase, we must still point out that “self custody” is not for everyone.

Holding digital assets on private wallets requires a good basic understanding of how the blockchain works and the practices associated with it.

Most of the time when a user pretends to be an expert and tries to move funds to private wallet outside of the exchanges, they end up causing some trouble.

Only the necessity to personally safeguard the seed phrase that guarantees access to the wallet represents a limit too advanced for a wide range of people.

Furthermore, the complexity of current hardware and software acts as a giant entry barrier for those who understand little or nothing about computer science.

If you are not prepared, you also risk being scammed in the blink of an eye, interacting with malicious dapps or with various scams circulating online.

The best solution to these limitations can only be study and dedication to understanding how trustless tools work.
For a novice user, the first approach with crypto exchanges is always the best choice, but over time it is advisable to start testing private solutions.

Remember, the laziness of not wanting to leave your comfort zone and study a new custody method must never surpass the will to be financially independent and free from any type of centralized control.