Until now these types of purchases took between 3-5 days to complete, as Coinbase waited for funds to transfer via ACH before they credited your purchase. This wait meant that users would often get frustrated because of bitcoin’s inherent volatility – the price could fall (or rise) by 20% before you received your coins, but you were still locked into the price you paid five days earlier.
Instant buys aren’t totally new for Coinbase – users using a credit card to buy cryptocurrency were able to do instant purchases, but this came with a 4% fee, more than double the 1.5% fee charged for bank account purchases. Plus, credit card buys have much lower limits – sometimes only a few hundred dollars a week. Bank account purchases on coinbase have much higher limits – ranging as high as $25,000 a week for the most verified and trusted customers.
The feature will roll out today to ~15,000 users, with “all eligible” US-based customer getting it by the end of the year. While Coinbase wouldn’t elaborate on what percentage of users will be eligible, it’s likely that doing things like completing the company’s verification tiers and showing good customer habits over time would increase the odds of being eligible.
Zach Abrams, Coinbase’s new Head of Product, explained that “Coinbase uses proprietary fraud prevention systems it has developed over the last 5 years, to determine how this instant purchase feature is rolled out to groups of customers and that the customers with access to this feature have sufficient balance in their bank account with good purchase history.”
Making sure users have enough money in their account to actually afford their purchase is important because Coinbase won’t be placing any holds on instantly purchased cryptocurrency, meaning a user will be able to buy bitcoin and transfer it off exchange before the ACH withdraw is actually completed.
Of course this means Coinbase could potentially be left paying for a fraudster’s purchase, since banks won’t reimburse merchants for declined ACH withdraws due to insufficient funds.
For comparison, Gemini, the Bitcoin exchange run by the Winklevoss twins, allows users to instantly buy and trade up to $500 per day in cryptocurrency purchased via ACH transfer, but won’t let you withdraw it from the exchange until the withdraw clears.
The fact that Coinbase will allow instant off-platform withdraws for as much as $25,000 worth of bitcoin before payment is received is a pretty strong statement in regards to how confident they are in their fraud prevention systems.
Coinbase users will get an email once instant purchases become available on their account.