In the course of the merge, Coinbase and other crypto exchanges are pausing Ethereum and ERC-20 withdrawals and deposits. What it means and why it matters.
As Ethereum merges next month –and as the blockchain transitions from proof of work to proof of stake — the biggest crypto companies are now announcing what retail investors can expect.
The pause is a precautionary measure, Coinbase said in a blog post, with the downtime allowing the exchange to “ensure that the transition has been successfully reflected by our systems.” The “merge” refers to a significant protocol update that will see the Ethereum mainnet combined with the proof-of-stake beacon chain, completing the network’s transition to proof of stake.
“Pausing deposits and withdrawals during an asset upgrade is standard operating procedure,” a Coinbase representative told Decrypt via email.
Indeed, Coinbase and other crypto exchanges have paused deposits and withdrawals in the past when blockchain networks underwent major changes. For example, in 2017, Coinbase paused activity during the Bitcoin and Bitcoin Cash split. The exchange did so again in 2018 and 2020 when Bitcoin Cash experienced subsequent hard forks.
If you were trading crypto back then, then you know the drill by now. But if you’re new to crypto, updates from Coinbase regarding what to expect may provide some peace of mind.
“We do not expect any other networks or currencies to be impacted and expect no impact to trading for ETH and ERC-20 tokens across our centralized trading products,” the company further explained in its post detailing how the Ethereum merge will affect its customers.
The tokens will still be tradeable on Coinbase, meaning customers with existing ETH and ERC-20 assets will still be able to swap for other cryptocurrencies and buy and sell with existing funds during the merge, which is expected to happen on or around September 15 or 16.
Coinbase did not provide specifics on exactly when its deposits and withdrawals will be paused, but the company’s Twitter and status website may provide updates.
“At this time, we are only anticipating pausing deposits and withdrawals for a short period of time. We cannot say for certain until the start of the merge,” a Coinbase rep told Decrypt when asked for specifics on the duration of the pause.
While other crypto exchanges will likely follow similar procedures, only Coinbase has so far provided notice to its users. But a Binance representative confirmed to Decrypt via email that it also plans to pause ETH and ERC-20 token deposits and withdrawals and will share further details soon.
Representatives for FTX, Crypto.com, and Gemini did not immediately respond to Decrypt’s request for comment.
Why might deposit and withdrawal pauses matter? If prolonged, it could affect the price of Ethereum and the ability for traders to enter and exit positions. While Coinbase said it anticipates the delay to be brief, it could still make it a little more difficult for traders to “buy the rumor, sell the news” when the merge happens, as analysts expect.
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