Rep. Maloney Urges Investor Protections in Cryptocurrency

Dec 8, 2021
Press Release

WASHINGTON, DC — At today’s Financial Services Committee hearing titled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States,” Congresswoman Carolyn B. Maloney (D-NY), senior member of the committee, advocated for investor protections in the American financial systems, highlighting potential losses customers may face in the event of a hack or unauthorized withdrawal. 

 

During the hearing, Rep. Maloney stated, “Our financial system has been built up over time – with us learning from each financial crisis, fixing and adjusting as new financial risks come forward. From the Great Depression and the creation of the FDIC and deposit insurance, to the Dodd-Frank reforms after the 2008 financial crisis. We may not all agree on every aspect of those laws, but they’ve made our financial system – and our entire economy – more resilient and consumers and investors more protected when things do go wrong.” 

 

She then asked Alesia Jeanne Haas, CEO, Coinbase Inc. and CFO, Coinbase Global Inc, “What happens today for a Coinbase customer in the event of a hack of Coinbase or a Coinbase wallet or in the event of [an] unauthorized withdrawal? What protections does a customer currently have? [FDIC] insurance, commercial insurance?” 

 

Ms. Haas replied, “So Coinbase does secure 12% of the world's cryptos, I shared with you earlier, and we have extensive controls to protect our customer assets. We bifurcate our assets into two different storage systems. We call one the hot wallet and we call one cold storage. And less than 2% of our assets are held in a hot wallet, which is subject of a cyber-attack. Specifically, the incident you mentioned was not a hack of the Coinbase systems. But in that event, where if customers did lose funds due to other losses, we did reimburse customers for that event. We do protect our customers for any hack of the Coinbase hot wallet and we have third party insurance plus we use our own balance sheet to protect our customers for the event of loss on our platform. […] With regards to what losses we typically see though in the press, we typically see these are account takeovers at the end point where a customer has lost their credentials and then has had a hack of their own phone, their own personal device. And that is unfortunate at this point in time because that loss is not well protected for within the broader crypto economy. That is something Coinbase continues to study.” 

 

Rep. Maloney continued, “Is that uniform, the protections you talked about, for all crypto exchanges and wallets or just for yours?” 

 

Ms. Haas answered, “I’m speaking specifically about the Coinbase protections we offer.” 

 

Rep. Maloney resumed, “Okay, so it's not available to others. So, do you think customers could benefit from some uniformity and standardized, minimum protections, if and when customers lose their funds through no fault of their own?” 

 

Ms. Haas responded, “I do believe there's opportunity there.” 

 

You can watch the Congresswoman’s full exchange here. 

 

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