Modernizing Financial Crime Detection in the Crypto Space: Coinbase’s Call to Action
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Coinbase Advocates for Tech-Driven Regulatory Updates
Coinbase has made a compelling case for U.S. regulators to modernize their approach to combating financial crime in the cryptocurrency sector. The company argues that employing cutting-edge technologies can provide law enforcement with clearer leads while reducing unnecessary paperwork for compliant businesses.
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Proposal for Advanced Technological Approaches
In a letter dated October 17, 2025, Coinbase appealed to Treasury officials to embrace novel strategies involving blockchain analytics, artificial intelligence, APIs, decentralized identifiers, and privacy-preserving proofs. This recommendation is part of a public feedback initiative related to a Treasury notice seeking innovative methods to identify illicit activities involving digital assets.
Coinbase’s Tech-Friendly Recommendations
Through a comprehensive 30-page submission, Coinbase’s Chief Legal Officer Paul Grewal outlined several actionable steps. One major proposal involves establishing safe-harbor testing environments where businesses can experiment with new monitoring tools without the threat of immediate enforcement.
“When criminals innovate in financial crime, law-abiding innovators must keep pace,” Grewal emphasized, highlighting the necessity for modernized reporting methods that do not overlook genuine threats.
Coinbase also urged the Treasury to acknowledge decentralized IDs and zero-knowledge proofs as legitimate means of customer verification and to endorse standardized APIs for efficient data exchange between exchanges and regulators.
The Rationale for Change
Coinbase contends that current regulations under the Bank Secrecy Act generate numerous low-value suspicious activity reports, inundating both companies and regulators. The firm advocates for a results-oriented approach that prioritizes actual detection and prevention of illicit activities over mandating outdated procedures.
The company also positioned this as a matter of national competitiveness, referencing a white paper from their policy division titled “The National Security Case for Crypto and Blockchain.”
Addressing Privacy and Data Concerns
Privacy advocates and civil liberties groups have voiced concerns regarding blockchain tracing, which can reveal transaction connections that were previously difficult to uncover. Activists caution against potential overreach.
Coinbase proposed to the Treasury a strategy of targeted, meaningful reporting to minimize broad data collection, thereby protecting privacy while enhancing enforcement efficacy.
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