Should you direct deposit your paycheck into Coinbase? We asked experts

Coinbase, the cryptocurrency exchange platform, is making it easier for people to turn their dollars into digital currency.



Myles Ma

Myles Ma

Senior Reporter

Myles Ma is a senior reporter at Policygenius, where covers personal finance and insurance and writes the Easy Money newsletter. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

Published September 29, 2021 | 2 min read

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Update, Oct. 4, 2021: Coinbase disclosed last week that someone stole cryptocurrency from the accounts of about 6,000 users, as first reported by Bleeping Computer. Coinbase told users the attacker accessed the accounts through a phishing campaign.

Coinbase, the cryptocurrency exchange platform, is making it easier for people to turn their dollars into digital currency.

On Monday the company announced its customers can deposit their paycheck directly into their Coinbase accounts and put it to work trading cryptocurrency right away. Previously, you’d have to put your paycheck into a bank account before moving it into Coinbase. The direct deposit feature will be free.

Users can set how much of their paycheck will be deposited into Coinbase through the Coinbase app. The app also provides instructions for people to set up direct deposit manually with their company’s human resources department. From there, they have the option to immediately convert their pay into one of the 100-plus cryptocurrencies traded on the platform, or leave it in dollars. 

Should you deposit your paycheck at Coinbase?

If you’re already transferring a large amount of money into Coinbase regularly, this will make your life more convenient. You probably already know exactly how you want to invest it and how much you want to risk.

For the rest of us, this could be a riskier proposition. The reason most people put their paycheck in a bank is because it’s safe. Banks are insured by the FDIC — even if the bank closes, at least $250,000 of the money in your account is guaranteed by the federal government.

Coinbase accounts are not FDIC insured. Because of that (and because you probably need money for bills and food and stuff), you probably don’t want to put your entire paycheck into Coinbase. 

If you want to regularly invest in cryptocurrencies, you may want to dedicate a portion of your paycheck to Coinbase, but you should weigh your financial circumstances, your need for liquid funds, and your investment preferences before doing so. And you still might want to talk to a professional financial advisor first.

“What really matters is what are you going to do with that money once it’s at Coinbase,” says Ric Edelman, founder of the Digital Assets Council of Financial Advisors. “How much of it are you going to invest and to what?”

Cryptocurrency tends to be volatile, it makes sense to invest only what you’re willing to lose. While you won’t have to worry about taxes if you direct deposit money into Coinbase, any gains you make from investing in cryptocurrency on the platform could be taxable, so hang on to your paperwork and consult a tax professional when in doubt. Read our guide to cryptocurrency and taxes to find out more.

Image: Alfred Gescheidt / Getty Images