Coinbase Says 99% of Customer Crypto Is Offline Following Binance Hack

Coinbase said on Wednesday it keeps more than 99% of customer crypto in offline cold storage and that last week’s Binance hack left its systems and customer funds unaffected.

The exchange set out its custody controls in a blog post that described the theft as Binance’s reported hot wallet incident. Binance has put its loss at about US$6.34 billion (AU$9.07 billion), drained from hot wallets on 29 October in an attack the FBI has attributed to North Korea.

Binance said on Wednesday it had replenished about 98% of the stolen assets. Its latest proof-of-reserves snapshot now covers 44 tokens, up from 10.

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Keys Kept in Pieces

Coinbase keeps a small percentage of assets in hot wallets, which stay online to process withdrawals. It said any excess is moved back to cold storage continuously. Its custody vault for institutions runs entirely in cold storage, with assets segregated onchain.

For cold wallets, each private key is split into pieces. That key is never reconstructed in full, even when a transaction is signed, Coinbase said. 

In hot wallets, no single employee holds standing access to the signing service, and any change needs approval from multiple staff. 

The exchange said access to production systems is granted only when a task requires it. Its staff sign in with phishing-resistant methods, and designated personnel pass enhanced background checks.

Limits, Alarms and Kill Switches

Coinbase also caps how fast assets can move from cold wallets to refill hot wallets. Alarms trigger on unusual withdrawal volumes or odd activity across accounts, wallets, assets and networks. Its wallet operations team then investigates before a flagged transaction goes through.

Some of its kill switches are cryptographic. They take signing keys offline until access is deliberately restored after a review.

Coinbase said artificial intelligence is rapidly changing the security landscape, and that it will keep investing in security in response.

Coinbase said customer assets are held 1:1, remain the customers’ property and are not lent or used without their instruction. 

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