Centralized Exchanges vs. Self-Custody: Which is Safer for Your Crypto?

• David Schwartz is indifferent about storing cryptocurrency on the Coinbase crypto exchange.
• Schwartz thinks the safety of users’ funds depends on the exchange’s activities.
• Crypto exchange depositors are unsecured creditors.

Ripple’s Chief Technology Officer, David Schwartz, has expressed skepticism about the safety of storing cryptocurrency on centralized exchanges. In a recent online discussion, Schwartz highlighted the potential risks for users’ funds in the event of an exchange’s financial instability.

I have no particular reason to think it's not safe to keep crypto at Coinbase. But, as with other centralized exchanges, if they screw up enough, your funds will be lost. For many, it's still better than self-custody because the odds that they'll mess up are higher.

— David "JoelKatz" Schwartz (@JoelKatz) July 15, 2024

Schwartz commented while responding to Joe Carlasare, a commercial litigator, who analyzed the potential risks of storing funds on crypto exchanges. According to Carlasare, depositing funds into a crypto exchange makes the depositor an unsecured creditor to the exchange.

Carlasare explained that by doing so, the depositor effective…

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