What to expect on Coinbase and other crypto exchanges during the Ethereum merger

With the long-awaited Ethereum is merging happens next month – and the blockchain moves from proof of work to proof of effort— The biggest crypto companies are now starting to announce what the experience will look like for retail investors.

Coinbase is temporarily halting Ethereum and ERC-20 token deposits and withdrawals during the merger, the stock exchange announced on Tuesday.

The pause is a precautionary measure, Coinbase said in a statement blog posts, with the downtime allowing the exchange to “ensure that the transition has been reflected by our systems.” The “flash” refers to a significant protocol update that will see Ethereum the main network combined with the proof-of-stake beacon chain, completes the network’s transition to proof-of-stake.

“Pausing deposits and withdrawals during an asset upgrade is standard operating procedure,” a Coinbase representative told me Decrypt by e-mail.

In fact, Coinbase and other crypto exchanges have stopped deposits and withdrawals earlier when blockchain network underwent major changes. For example, in 2017, Coinbase stopped activity during Bitcoin and Bitcoin Cash share. The exchange did again in 2018 and 2020 when Bitcoin Cash experienced successive hard forks.

If you traded crypto back then, you know how you feel now. But if you’re new to crypto, updates from Coinbase about what to expect can give you some peace of mind.

“We do not expect other networks or currencies to be affected and expect no impact on trading for ETH and ERC-20 tokens across our centralized trading products,” the company further explained in its post detailing how the Ethereum merger will affect customers theirs.

The tokens will still be tradable on Coinbase, meaning customers with existing ETH and ERC-20 assets will still be able to exchange for other cryptocurrencies and buy and sell with existing funds during the merger, which is expected to happen on or around September 15 or 16.

Coinbase did not provide details on exactly when deposits and withdrawals will be paused, but the company’s Twitter and status website can provide updates.

“At this point, we only expect to pause deposits and withdrawals for a short period of time. We can’t say anything for sure until the start of the merger,” a Coinbase representative said Decrypt when asked for details about the duration of the break.

While other crypto exchanges are likely to follow similar procedures, only Coinbase has so far notified users. But a Binance representative confirmed it Decrypt via email that it also plans to pause ETH and ERC-20 token deposits and withdrawals and will share additional details soon.

Representatives for FTX, Crypto.com and Gemini did not immediately respond Decryptits request for comment.

Why can pauses in deposits and withdrawals matter? If extended, it could affect the price of Ethereum and the ability of traders to enter and exit positions. While Coinbase said it expects the delay to be short, it could still make it a bit more difficult for traders to “buy the rumor, sell the news” when the merger happens, as analysts expect.