I am an attorney (not yours, and probably not in your state), and there is value in holding your crypto on an exchange like Robinhood or PayPal (less so with CoinBase).
One of the most common sayings in the subreddit is that if you don't hold the keys, you don't own the bitcoin. While this may be true from a purely computer-science perspective, it is not true from a legal perspective.
When you hold crypto on an exchange or with a service like Robinhood or PayPal, you own title to the bitcoin (you could have "bailed" it to the exchange/service, or alternatively it is being held by the exchange/service on your behalf), and if the exchange or service makes some mistake, you have legal recourse against the exchange or service. In other words, you can sue to get damages from them for their mistake.
The ability to file a lawsuit against them only has value if the exchange/service has assets you would be able to seize. So, this means that a better bailee would not only hold crypto assets and would have substantial other assets that you could seize if you won the lawsuit. In other words, services like CoinBase, whose sole business is crypto, could lose all their assets in the event of a bad security breach, or in the event of theft. This has been seen before with MTGOX, and everyone who stored any crypto on MTGOX was left pretty much SoL.
Again, this brings me back to PayPal and Robinhood. These two companies have substantial assets and revenue streams primarily from sources other than crypto. So, if they get hacked and lose all of their crypto, there is still likely going to be recourse against these companies.
There are also other advantages from holding your crypto on these services. Specifically, it adds additional, multiple layers of protection against "wrench attacks." Wrench attacks are when someone learns you have crypto so they come over to your house and "hit you with a wrench" (physical violence) until you give them your crypto. If you hold your own keys, this transfer is instant and irreversible.
By holding your crypto on PayPal or Robinhood, you ensure substantial delay between your crypto being sold and the funds being available. When you sell your crypto on Robinhood (I have no experience with PayPal), for example, it takes typically 3-5 business days (or more) for the funds to clear and to be able to withdraw them to your bank account.
Then, once your funds are available to withdraw, you withdraw them to your bank account (typically 3-5 more business days).
Then, once the funds hit your bank account, you must either go into the bank or write a check or have some other way of getting the funds to the attacker.
In other words, the substantial delays built into holding your crypto on a service like PayPal or Robinhood act as a lengthy buffer of safety when there will likely be chances to act and protect yourself and (secondarily) your assets.
Wrench attacks do happen, and storing your crypto on a service like Robinhood or PayPal has its value in protecting your crypto and giving you recourse against a company that has other assets that are seizeable.
Certainly holding your own keys is great and has its advantages, but it also has its own risks. Even losing your keys, for example, is a risk that you don't have when storing on Robinhood or PayPal.
So, there it is, the case for storing crypto on a service like PayPal or Robinhood.
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source https://www.reddit.com/r/btc/comments/k4cgi7/the_case_for_holding_crypto_on_robinhoodpaypal/
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