In May 2025, Coinbase found itself in hot water after revealing a major security breach that compromised the personal information of nearly 70,000 users and reportedly led to losses as high as $400 million. The fallout triggered a wave of lawsuits and intensified scrutiny over the legal protections—or lack thereof—afforded to cryptocurrency users, especially in the United States.
The breach itself reportedly involved overseas customer support staff who were bribed to facilitate unauthorized access to user data back in December. Though Coinbase disclosed the incident months later, controversy swirled around the timing and the company’s user agreement. Critics pointed to recent changes allegedly designed to limit customers’ ability to take collective legal action through class-action lawsuits. Coinbase, however, insisted that such arbitration clauses have long been part of their terms.
To better understand what this means for crypto investors and why legal recourse remains so challenging, I spoke with legal experts from different regions: Charlyn Ho, founder of Rikka, a US-based legal consulting firm; Catherine Smirnova of Digital & Analogue Partners in Europe; and Joshua Chu from the Hong Kong Web3 Association. Their insights reveal how legal frameworks for data breaches vary drastically worldwide—and why American consumers often face uphill battles.
No Single Federal Law Governs Data Breaches in the US
Unlike Europe’s GDPR, the US lacks a unified federal data breach law. Instead, data breach rules differ by state, with 50 distinct notification requirements. Coinbase’s breach notification, for example, was filed in Maine. Publicly traded companies also fall under the Securities and Exchange Commission’s disclosure mandates, but there’s no sweeping federal statute that standardizes how data breaches must be handled nationwide.
Ho explains that in the US, contracts—like Coinbase’s user agreement—carry significant weight. These agreements typically include clauses that limit the company’s liability for data loss or damages. While Coinbase has pledged to reimburse users who suffered financial harm, legally, they might not be required to do so. “Once you agree to these terms, you’re generally bound by them,” Ho says, “which often means limited ability to recover losses.”
Europe and Hong Kong Offer Stronger Protections
Outside the US, the picture changes. In Europe, Smirnova highlights that regulations like GDPR are mandatory and regulatory, not just contractual. This means no user agreement can override the fundamental rights GDPR provides to data owners. Crypto exchanges operating in the EU must comply with strict data protection laws and consumer protections that apply regardless of what their terms say.
Similarly, Joshua Chu points out that in Hong Kong and many other jurisdictions, companies cannot fully disclaim liability through contracts alone. Courts may scrutinize and invalidate overly broad arbitration clauses or liability waivers, especially if they contradict local laws. Chu also notes that many crypto platforms strategically choose arbitration venues—such as Hong Kong—for dispute resolution, which can be efficient but also costly and restrictive for users.
The Arbitration Clause Dilemma
One particularly thorny issue in the US is arbitration clauses combined with class-action waivers. These are common in consumer contracts, and Coinbase’s recent terms reportedly reinforced these provisions just before announcing the breach. Arbitration keeps disputes private and limits costly public lawsuits, which companies prefer. The US Supreme Court has upheld the enforceability of such clauses, making it difficult for users to band together in court.
Ho points to the landmark 2011 AT&T Mobility case, which solidified the Federal Arbitration Act’s dominance over state laws that might restrict arbitration clauses. This means consumers often have little choice but to resolve disputes privately, facing high costs and legal complexities.
Centralized Data Means Centralized Risk
Smirnova calls out major crypto exchanges as “Web2.5” companies—entities that operate with centralized control over user data despite crypto’s decentralized ethos. These firms store vast amounts of sensitive information centrally, using it to optimize services and gain competitive edges. Because of this, they should be held to the same standards of accountability as traditional digital platforms. Data breaches not only expose users to financial risks but also threaten privacy on a massive scale.
Looking Ahead: Rethinking Data Privacy and Monetization
The conversation around data privacy is evolving. Smirnova emphasizes that users benefit from personalized digital experiences, which rely on their data, but many don’t realize its value. As AI and other technologies advance, personal data will be exploited in even more ways—raising urgent questions about who profits from it and how individuals can participate in that value.
While governments and companies continue to collect increasingly intimate data—from biometrics to behavioral patterns—there’s growing awareness that legal frameworks must adapt. The hope is that society will push for better data rights and monetization models that empower users, rather than leaving them exposed when breaches happen.
