> Buying when the customer orders, rather than when the ACH clears, does create a risk if the price plummets.

It creates a risk either ways, it's just that different parties take ownership of the risk.

> But buying only when the funds clear creates a risk when the price skyrockets. It makes it harder to ever please customers with an 'honored price' that's lower than when the BTC arrives.

Actually you're complicating it more than necessary. There is no reason for coinbase to execute a market order as soon as the funds clear. They can simply let a customer make an informed decision, and decide if they want to buy at current market rate (market order) or using a limit order which will be executed internally if a customer tries to sell lower or will be filled on the exchange if the exchange reaches fills the order first.

This practice has existed for decades, whichever order is filled first simply cancels the other order.

This is also completely fair and very acceptable. Buying first waiting and waiting for the transfer to clear is not and will never be an good choice.

> Also, any whiff of a two-step process, where the customer reconfirms the buy-intent at funds-clearing, would put Coinbase closer to holding $USD balances for customers. That's something that I suspect, as a regulatory matter, they would rather not do. A single irrevocable 'buy' with delivery some time later (at either a locked-in or a floating price) is closer to the e-commerce transactional pattern they'd prefer.

I can see why this would be viewed as the only choice. Unfortunately as I have stated in another thread, when trouble from regulator begins they will get classified as akin to a financial institution anyways. When this happens they'll have more trouble due to the misrepresentation.

> Otherwise, they look more like a money-transfer/foreign-exchange/banking/daytrading outfit.

Again, I can see where you are coming from, but this doesn't mean the law will see them as anything but a money-transfer/banking/daytrading outfit as they fit the definition most of these in totality and a few (day trading) loosely. I left out foreign-exchange as this one is the only one they are safe from, until/unless BTC gets reclassified from a security(it meets SECs definition requirements) to a currency.

> Despite the last 2 weeks, BTC has had more total upswing than downswing – going over its history from $0 to $hundreds in value. So, buying early likely will have won more often than lost, for Coinbase and its customers.

On first glance this may seem like a likely observation, but it is unfortunately misguided (no offense intended). Unfortunately people give too much credence to the notion that past behavior dictates future movement and forget to compensate for lack of sample data and =/- effects of things such as spreads, volume, volatility etc.

If there is a single profound lesson I can impart about this topic it would be "buy low sell high" only works for short-selling, albeit in reverse order ("sell low buy lower") but for most traders, investors and speculators they should learn that the true lesson to remain profitable in any trade is to "buy high and sell higher". This is simply calculated using momentum previous x day momentum. Preferably between 10 to 20 days. You could use a higher number but it would be too late to enter or exit or a lower that would enter and exit too often.

I can talk endlessly on this topic and its importance in all entrepreneurial/business/trade endeavors, but I digress.

> Calling that approach 'simply stupid' and 'simply insane', without having considered the real risk and regulatory factors affecting their business is silly.

I agree with your prognosis, I do have a bias that I failed to consider. But unfortunately, if this was the only solution to avoid the paperwork, auditing and additional responsibilities that would come from acknowledging that the business practices are similar to those of a financial institution, they are unfortunately doing something pretty insane and simply stupid. There is no way this will not drive them to hurt themselves and their users.

Its just the fact that has been proven time and time again, if the US regulators decided you fit the definition of a financial institution even loosely then they will deem you and prosecute you on past transgressions accordingly.

In the eyes of regulators here "If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck", no exceptions considered.