Coinbase, the largest cryptocurrency exchange in the United States, has announced that it is delisting XRP, Bitcoin Cash and Ethereum Classic. The move comes in response to what Coinbase calls “underutilization” of the coins, which will be removed from the exchange starting in January 2023.
With the coins withdrawn from the Coinbase Wallet in just over a month, those holding the assets must decide what to do with them as the deadline approaches.
Why are XRP, Bitcoin Cash and Ethereum Classic being delisted?
It’s not unusual for coins to be removed from an exchange or wallet due to low usage or other concerns, and with three coins involved, this isn’t a completely surprising move.
XRP in particular has caused controversy. More recently, it has been embroiled in an ongoing court battle with the US Securities and Exchange Commission (SEC). Digital payment network Ripple’s native cryptocurrency has raised more than $1.3 billion “through an unregistered, ongoing digital asset securities offering” from which the company’s founders personally profited, an SEC filing claims.
Bitcoin Cash and Ethereum Classic have both recently experienced what is known as a “hard fork”. This involves splitting the blockchain into two.
Hard forks usually happen when the coin community disagrees on which direction to take the blockchain, said Josh Fraser, co-founder of Origin Protocol, which created OriginDollar, an income-generating stablecoin, and Origin Story, an NFT platform.
“One and a half [coin’s] the community blockchain wants to go one way and the other half wants to go another,” Fraser said. “When that happens, the people who own the coin now have two, and the value is split.”
According to Commodity.com, when there is a hard fork, one of the coins may dominate while the other may not have as much acceptance or value.
All of these factors likely played into Coinbase’s decision to remove coins from its wallet this week, Fraser said.
“Coinbase supports many digital assets. They have their own process by which they choose what they want to list and what they don’t want to list. A lot goes into that decision-making process — demand, safety, regulatory concerns,” Fraser said. “Also, we see assets being delisted when there’s not enough interest in the assets and not enough trading, so the exchange doesn’t make any profit from them. ”
What does delisting mean for your funds?
Importantly, assets removed from Coinbase Wallet will not be lost as a result of this week’s decision. A statement issued by the company explained that any unsupported assets remaining on Coinbase after January will still be associated with each user’s address and can be retrieved via the owner’s Coinbase Wallet recovery statement.
“After January 2023, in order to view or transfer these assets, you must import your recovery statement to another non-secured wallet provider that supports these networks,” Coinbase said.
This means that the coin’s assets are completely safe even after January, said Reeve Collins, co-founder of Tether, the first and largest stablecoin, and co-founder of Web3 and blockchain solutions company SmartMedia Technologies.
“Just because they’re not listed doesn’t mean they’re at any risk,” Collins explained. “They will be stored on Coinbase until you decide to move them out of Coinbase.”
While delisted assets are safe, that doesn’t mean leaving them with Coinbase is the best move, Collins added. “It would be like putting cash in a safe somewhere,” he said. “You have to transfer them out of Coinbase at some point or you can’t trade or sell them.”
The good news is that all three coins are still very popular in the cryptocurrency world, and there are many other options for their long-term storage and use.
Options for delisted coins
Those who hold XRP, Bitcoin Cash or Ethereum Classic assets can choose to keep the coins for themselves, transfer them to another exchange, or even sell them.
Spend any time talking to cryptocurrency experts and you’ll likely hear the phrase, “Not your Keys, not your Coins.” This is a common mantra referring to what is often seen as a best practice in the crypto world – self-storage of coins. When you hold coins on an exchange, you give up control over them and take away the exchange’s promise that the coins will be there. As the recent collapse of the FTX stock exchange shows, these promises are not always fulfilled.
In the event that Coinbase delists coins, both Collins and Fraser suggested that the best first step is to simply withdraw your assets from the exchange and store them in your own wallet.
“The Ledger hardware wallet supports all three of these coins. So if you buy a Ledger, you’re good to go,” Fraser said.
Register with another exchange
Those who dabble in cryptocurrencies already know this, but there are many cryptocurrency exchanges besides Coinbase. After XRP, Bitcoin Cash and Ethereum Classic are delisted by Coinbase, holders of these assets can simply choose to transfer them to another exchange.
“You have hundreds of different exchanges. There are different exchanges that are popular in different parts of the world,” Fraser said. “Coinbase is more popular in the US, but globally Binance is the biggest exchange.”
Those who choose to transfer their coins to another exchange will simply need to research in advance whether the exchange supports XRP, Bitcoin Cash or Ethereum Classic. But there are many exchanges that continue to support all three, Fraser and Collins said.
Sell your coins
While the timing of selling any asset, including cryptocurrency, is a personal decision, if you’re holding XRP, Bitcoin Cash, or Ethereum Classic, this is another option. However, if you choose to sell, be aware that it will cause a tax event, Fraser said.
“If you sell, there are tax consequences,” Fraser said. “If you have a lot of Bitcoin Cash and you sell it now, you’re going to get a tax hit for it. But if you transfer the coins to a wallet or another exchange, there will be no tax event.”
The bottom line, according to both Fraser and Collins, is that all three delisted coins still have value. Coinbase’s decision does not affect this reality.
“Coins are still worth what society thinks they are worth. Just because Coinbase doesn’t support them doesn’t mean these coins are going away,” Fraser said. “Tens of thousands of people around the world like and support these coins. They will all be fine. “Coinbase is a big exchange, but there are many other exchanges.”