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Comment by thinkcomp | Hacker News Reader

That's one million consumer accounts with no FDIC insurance, no surety bonds, and no other backstop in the event of a problem.

I'd love to see a Coinbase blog post about why Coinbase doesn't need to be licensed like every other MSB registered with FinCEN.

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FDIC insurance is aimed at banks that make loans, which Coinbase does not.

This is the correct answer. FDIC insurance is needed because when you give your money to a bank, they turn around and lend it out to other people, so when you want to withdraw they may not be able to collect enough to pay you out.

I suspect when you deposit 10 BTC in Coinbase, they actually just hold it for you. Honestly, given how volatile Bitcoin is, and the general upward trend, it would basically be insane for them to try to invest it in any other assets.

Maybe FDIC insurance specifically doesn't make sense for Bitcoin, but it can still be lost or stolen in a full-reserve model and thus should be insured.

I've often wondered the same. Section 1.1 of their user agreement:

"1.1 Coinbase helps you make payments to and accept payments from third parties. Coinbase also provides a bitcoin wallet service where you can store your bitcoin. Coinbase also allows users to buy and sell bitcoin. Coinbase is an independent contractor for all purposes. Coinbase does not have control of, or liability for, the products or services that are paid for with Coinbase services. We do not guarantee the identity of any user or other party or ensure that a buyer will complete a transaction. Coinbase is not a money transmitter. Coinbase assists its users in Bitcoin transactions."

https://coinbase.com/legal/user_agreement

You hook up a bank account, "transmit" funds from a bank, receive virtual currency (and in reverse) but they are an independent contractor, assisting with the process. Very interesting approach.

A simple person might say the service very much looks like a money transmission, money exchanging business. The fees for acting as a money transmitter without licenses is supposedly up to $1k/incident.

"Coinbase is not a money transmitter" is a demonstrably false statement in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A). You can find Coinbase's registration with FinCEN as a Money Services Business at:

http://www.fincen.gov/financial_institutions/msb/msbstatesel...

Just search for Coinbase. They provided the address of their statutory agent in Delaware even though they're in San Francisco.

That's a million wallets that can instantly, pseudonymously send money to some random dude halfway around the world.

There's nothing stopping someone from insuring Bitcoins.

http://www.businessinsider.com/as-bitcoin-grows-in-popularit...

I have personally never understood the criticisms of new things of the form "<new thing> doesn't provide the service that we've had for years with <old thing>!" IT'S NEW AND DIFFERENT, GIVE IT A CHANCE.

> That's one million consumer accounts with no FDIC insurance, no surety bonds, and no other backstop in the event of a problem.

All of which were created voluntarily by customers, which indicates that there is demand in the market for different types of asset/currency, some of which might not have FDIC insurance or any of those things.

yeah, but just think of how much they save on transaction costs when they buy something online [without the ability to chargeback]!

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