Coinbase Faces Backlash Over Solana Delays, Users Demand Proof of Reserves

Coinbase is under fire for significant delays in processing Solana (SOL) transactions, with some users experiencing wait times exceeding 14 hours. These issues have sparked concerns about the exchange's liquidity and operational practices. Many are questioning whether Coinbase is staking users' SOL without their consent, potentially causing delays due to unstaking processes.

Reports of transaction delays have frustrated users, with some sharing experiences of transactions pending for over a day. One investigative journalist noted their transaction was canceled after a full 24-hour wait. Some users suspect Coinbase is using deposited SOL for staking to generate yield, which could explain the delays when large withdrawals require unstaking.

Criticism has intensified following the collapse of FTX, which highlighted the risks of poor management and lack of transparency in centralized exchanges. Calls for Proof of Reserves (PoR) have grown louder, with many users demanding Coinbase demonstrate its solvency and operational integrity. CryptoCurb, a prominent figure in the crypto community, accused Coinbase of staking customer funds without consent and urged the exchange to undergo immediate PoR audits. He also criticized the industry for moving away from the PoR reforms introduced after FTX’s collapse.

Blockchain-tracking platform Whale Alert has flagged multiple large SOL transactions from unknown wallets to Coinbase, adding to speculation about the exchange’s liquidity. Coinbase Support attributed the delays to technical and blockchain-related issues, but developers and industry insiders have offered alternative explanations. Mert Helius, a well-known developer, argued that the problem lies within Coinbase’s infrastructure, which struggles to handle Solana’s fast transaction speeds. According to Helius, Coinbase’s system likely generalizes indexing across blockchains without adapting to Solana’s unique characteristics.

Adding to the controversy, Coinbase’s largest Solana validator is reportedly set to unstake 567,000 SOL, worth roughly $130 million, at the end of the current epoch. This has led users to question whether Coinbase ran out of liquid SOL and is now waiting for the unstaking process to complete before processing withdrawals.

This is not the first time Coinbase’s custodial practices have faced scrutiny. Recently, BlackRock amended its IBIT Bitcoin ETF filing, responding to concerns over Coinbase’s role as custodian. Investors called for on-chain proof of Bitcoin purchases to ensure transparency. The filing noted that Coinbase Custody is required to process withdrawals to public blockchain addresses within 12 hours of receiving a client’s instructions, subject to a confirmed minimum balance.

In the midst of these issues, Coinbase recently launched Bitcoin-backed loans for USDC, a move that has drawn mixed reactions from the crypto community. While this new offering highlights Coinbase’s effort to innovate, the ongoing SOL delays and liquidity concerns have raised doubts about the exchange’s transparency and operational reliability. Amid heightened skepticism, users continue to demand clear evidence of Coinbase’s financial health and business practices.