When you sell cryptocurrency on Coinbase, the funds from the sale go to your USD Coinbase wallet. USD Coin (USDC) is a stablecoin cryptocurrency pegged to the US dollar. This means each USDC is worth $1 USD. So when you sell crypto on Coinbase, you are selling it for USDC, a digital dollar that is held in your Coinbase account.
Why does the money go into my USD Coinbase wallet?
There are a few reasons why the proceeds of crypto sales on Coinbase go into your USD Coinbase wallet rather than directly to your bank account:
- Speed – Transferring funds into USDC is faster than sending to an external bank account.
- Transaction fees – Sending USDC has lower fees than traditional wire transfers.
- Liquidity – The funds are available immediately if you want to re-purchase crypto.
Keeping the money within Coinbase as USDC allows you to quickly and cheaply use those funds for future crypto purchases. You can also easily transfer the USDC to Coinbase Pro to trade between cryptocurrencies. Only when you want to cash out of Coinbase completely would you need to send the funds to your bank account.
Coinbase USD Wallet
The USD Coinbase wallet, sometimes referred to as the USD account, is where all USD balances are held on Coinbase. This includes:
- Fiat currency deposited into Coinbase
- Proceeds from crypto sales (converted to USDC)
- Cryptocurrency rewards paid in USDC
So any money funding your Coinbase account, earned in your account, or from crypto sales ends up in this USD wallet as USDC. You can hold a cash balance here or use it to buy crypto. The funds remain in your account and are not sent externally.
Withdrawing money from Coinbase
To get money out of Coinbase altogether, such as withdrawing to your bank account, you first need to convert the USDC in your USD wallet to fiat currency. Here are the steps:
- In your USD Coinbase wallet, click ‘Withdraw’.
- Enter the amount in USDC you want to withdraw.
- Choose the account you want to withdraw to (bank account or PayPal).
- Confirm the withdrawal.
Coinbase will then convert the USDC to fiat currency and send that to your connected bank or PayPal account. This process can take 3-5 days to reflect in your external account.
What is USD Coin (USDC)?
USD Coin (USDC) is a stablecoin cryptocurrency whose value is pegged to the US dollar. What this means is each USDC token is worth exactly $1. The price does not fluctuate.
USDC is an ERC-20 token that runs on the Ethereum blockchain. It was launched in 2018 through a collaboration between Circle and Coinbase. USDC reserves are regularly audited and attested to ensure the 1:1 ratio of USDC to USD is maintained.
Here are some key features of USD Coin (USDC):
- Fully collateralized by the US dollar – Each USDC is backed by $1 held in bank reserves by Circle.
- ERC-20 token – Runs on the Ethereum blockchain and is supported by Ethereum wallets and services.
- Stable value – Price does not fluctuate, always worth $1 USD.
- Quick transfers – Can move between crypto exchanges in minutes.
- Transparent – Monthly reports on USDC reserves provided by Grant Thornton LLP.
USDC combines the stability of the dollar with the speed and transparency of a cryptocurrency. This makes it very useful for digital transactions and keeping crypto funds stable.
USDC on Coinbase
On Coinbase, USDC plays a central role in facilitating transactions:
- Crypto sale proceeds are converted to USDC
- USD balances are held as USDC
- USDC can be quickly transferred between Coinbase and Coinbase Pro
- Low fees to convert between crypto and USDC
This frictionless use of USDC allows you to easily move funds around within Coinbase and take advantage of crypto trading opportunities.
How do I cash out my USD Coinbase wallet?
When you are ready to take money from your Coinbase account out to your bank, you need to withdraw from your USD Coinbase wallet. Here are the steps:
- Log in to Coinbase and click on ‘Withdraw’ under your USD wallet.
- Select the amount you want to withdraw, in USD Coin.
- Choose the withdrawal account, either bank account or PayPal.
- Double check the amount and account are correct.
- Click ‘Confirm Withdrawal.’
Coinbase will then process the conversion from USDC to USD, and send the funds to your linked bank or PayPal account. This can take 3-5 business days to reflect in your external account.
Withdrawal limits
Coinbase does have limits on the amount you can withdraw on a daily or weekly basis. The limits depend on your account verification level.
| Account Level | Daily Withdrawal Limit | Weekly Withdrawal Limit |
|---|---|---|
| Level 1 | $1,000 | $5,000 |
| Level 2 | $10,000 | $50,000 |
| Level 3 | $50,000 | $250,000 |
You can request higher limits once your account is fully verified. The level 3 withdrawal limits allow you to cash out large amounts from Coinbase conveniently.
How long does a Coinbase withdrawal take?
Withdrawing funds from your Coinbase USD wallet to your bank account or PayPal normally takes 3-5 business days. However, it can take up to 10 days in some cases.
Here is an overview of the Coinbase withdrawal timeline:
- Same day: Withdrawal initiated, funds debited from USD wallet.
- Up to 3 days: Funds converted from USDC to USD fiat currency.
- 1-3 days: Withdrawal processed by bank or PayPal.
- 1-2 days: Deposited funds reflected in external bank account.
So while the withdrawal leaves your Coinbase account quickly, it can still take almost a week to fully complete the transfer to your bank.
Speed up withdrawal time
There are a few ways you may be able to speed up the withdrawal process from Coinbase:
- Withdraw early in the day – This gives more processing time.
- Withdraw less than limit – Lower amounts may clear faster.
- Withdraw to PayPal – Usually faster than bank transfer.
- Use wire transfer – Instant but has a fee.
Withdrawing well below your daily limit and to PayPal can potentially cut the processing time in half compared to a bank transfer.
Does Coinbase charge a fee to withdraw?
For standard withdrawals from your USD wallet to a bank account, Coinbase does not charge a fee. However, if you want to speed up the transfer using a wire, there are fees attached:
- ACH transfer to bank account: Free
- Wire transfer: $10 ($25 if international wire)
There are also no fees to withdraw to a PayPal account from Coinbase. You may see some fees from your bank or PayPal for incoming transfers.
When withdrawing cryptocurrency directly from your Coinbase crypto wallet, network fees apply. However, converting crypto to USDC before withdrawing as fiat currency means no network fees.
Minimizing withdrawal fees
To avoid fees when withdrawing from Coinbase:
- Use ACH transfers for USD withdrawals
- Sell crypto to USDC first, then withdraw USD to bank
- Withdraw less than daily limit to avoid holds
- Batch withdrawals to reduce wire fees
Being strategic with the amount and timing of bank withdrawals can help minimize any fees.
Is Coinbase FDIC insured?
Coinbase itself is not FDIC insured, but they store most customer fiat currency deposits in custodial bank accounts which are insured up to $250,000 per customer.
Here’s how the FDIC insurance works on Coinbase:
- USD wallet balances are converted to USDC.
- USDC is backed 1:1 by USD reserves held at US banks.
- The fiat reserves are spread across multiple insured banks.
So while Coinbase itself does not have FDIC insurance, the underlying cash deposits are insured up to $250,000 per customer. This protects US dollar balances held on Coinbase up to that amount.
Securing USD funds
In addition to FDIC insurance on cash reserves, Coinbase takes a number of steps to keep USD funds secure:
- 95% of funds held offline in cold storage
- USD wallet keys kept in bank-grade vaults
- 2-factor authentication for account access
- FDIC insurance up to $250K through custodial accounts
The combination of offline storage, vaulted keys, and FDIC coverage provides substantial protection for USD funds held with Coinbase.
Does Coinbase report to the IRS?
Yes, Coinbase complies with IRS regulations and reports certain information about customer accounts and transactions:
- Form 1099-K – Reports gross proceeds from crypto sales for accounts with over 200 transactions AND $20,000 in sales.
- Form 1099-MISC – Reports referral bonuses, crypto rewards, and staking income over $600.
If you meet these reporting thresholds, Coinbase will provide the IRS with your:
- Name
- Address
- Taxpayer ID number
- Gross proceeds from reportable transactions
It is your responsibility to properly report crypto activity on your tax return using the Form 1099 details.
Avoiding surprises at tax time
To make sure you don’t get caught off guard by Coinbase IRS reporting:
- Keep track of crypto transactions for tax prep
- Review account statements
- Check if you’ll receive a 1099
- Proactively download tax forms
- Report all income on your return
With good record keeping, the 1099 details should match what you report. Always consult a tax professional if needed.
Does Coinbase report to other countries?
For customers outside the United States, Coinbase complies with tax reporting requirements in your local jurisdiction. This may include:
- Canada – Must report crypto sales and income.
- UK – No reporting if sold amount is under £12,300.
- EU – Tax reporting to local authorities over certain thresholds.
- Australia – Cryptocurrency transactions considered asset disposals.
Some examples of non-US reporting requirements:
| Country | Reporting Requirement | Threshold |
|---|---|---|
| Canada | T5008 slip | Over $10 CAD |
| UK | Capital Gains Tax | Over £12,300 GBP |
| Australia | Capital Gains Tax | All disposals |
Check your local tax laws to understand crypto reporting obligations in your specific country.
Conclusion
When you sell cryptocurrency on Coinbase, the funds are deposited into your USD Coinbase wallet as USD Coin. This stablecoin can be easily held, sent around Coinbase, or withdrawn to your bank.
Withdrawing the funds involves converting the USDC to fiat currency and sending that to your bank or PayPal. This process can take 3-5 days but is fee-free using a standard ACH transfer.
Coinbase is compliant with tax authorities and reports your crypto sales and income over certain limits. Be sure to keep your own records to reconcile with any tax forms you receive from Coinbase.
Understanding how selling crypto interacts with your Coinbase account and affects your taxes and reporting obligations allows you to use the platform smoothly and responsibly.