Troubled Waters for Coinbase: Increasing Fees, Neglection of ETC, and Rumors about Insolvency
As probably everyone knows now, Coinbase intends to quadruple its fees effective as of August 5 this year. Having failed to provide any explanation for such abrupt upsurge of charges, the exchange now faces yet another string of critical statements from across the community.
As a reminder, Coinbase opted to retain the free usage of wallets, yet increasing its current rates, now standing at 1 to 1.49 percent, to 3.99 percent and higher. The decision becomes even more controversial, as there are many exchanges, not as big as Coinbase but offering nearly the same range of services, that do not tend to make robbery, assault and battery out of their fees.
The news only fed the fire of rumors suggesting that Coinbase is on the brink of bankruptcy. The solvency issues started popping up for a reason, namely Coinbase’s refusal to recognize Ethereum Classic and freezing payouts of ETC tokens generated after the hard fork.
Coinbase’s Brian Armstrong, however, smiles and waves, and tells everything is perfectly fine.
Coinbase has all funds to cover user deposits. If you prefer to cntrl you own private keys, see our multisig vault https://t.co/Dt1EdiohpG
— Brian Armstrong (@brian_armstrong) August 1, 2016
The problems around Coinbase went even further, now that some Bitcoin users propose to remove the exchange from the list of recommended wallets at Bitcoin.org. Even though the reasons for such demands remain beyond any actual problems like increasing fees or technical issues, and mostly base on personal feelings of the complainants, the problem with further deterioration of the exchange’s reputation gradually becomes more serious.
The complaints in question mostly deal with the fact that Coinbase makes allegedly bad political decisions by supporting controversial solutions like Bitcoin XT or refusing to support the ultra-popular ETC. However, there are some other issues known to the general community that question the status of one of the world’s biggest crypto-exchanges.
For instance, Coinbase is somewhat notorious for its account closures due to compliance issues resulting from the exchange’s close links to traditional banks and, therefore, applicable regulations. Coinbase was the first US-based exchange to have received a regulatory approval, which means that it is legally bound to comply with AML and KYC policies. On the upside of all that, the regulation indeed provides customer protection to some extent. However, apart from account closures, it irritates the idealist part of the community, which believes that all that impudently contradicts the very philosophy of cryptocurrency.
Another possible issue is Coinbase’s active involvement in the accursed block size debate and strange relations with Ethereum. Their recent decision to discard ETC is also considered a poor move to buy some.
Finally, there is a sort of a copyright issue. Coinbase has filed nine patents for innovations related to cryptocurrency, which list, for example, bitcoin exchanges, hot wallets, and tips buttons. Evidently not their inventions at all, these items raise the temperature of hatred around the exchange even more.
If the pledge to remove Coinbase from the list of recommended exchange comes into practice, the exchange will surely face hard times. Even though it has attracted numerous new users to the ecosystem, lots of them were eventually dissatisfied with the services. Possible solvency issues and sudden upsurge of fees may only further undermine the exchange’s reputation and remove it from the list of top players without any direct involvement from some prominent community members.
One of them, Satoshi-class mysterious Bitcoin-Cobra wrote on GitHub:
“Their leadership keeps making bad decisions and they always seem to be trying to undermine Bitcoin in some way (XT, Classic, Ethereum, etc). I don’t know why any sane person would use their services.
It’s not really the sort of company we should be pushing new users too, Coinbase is too irresponsible and keeps forgetting that they’re essentially a bank and shouldn’t be behaving like a careless startup keen to “move quick”. I’m very glad more people are starting to realize the truth about Coinbase.”
While only time will tell whether this point of view gains any significant support, Coinbase is most likely closing in on troubled waters.
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