This is not news, and this news will not be the last of its kind. Coinbase exchange selling user data to a government entity is just the tip of the iceberg. In fact, it would not be farfetched to say that almost all online platforms with a large user base sell their data. Now, they may do it for money or simply succumb to peer pressure coming from the regulators. In any case, user data is not safe anywhere simply because it carries too much value to be left unsold. Speaking of value, the Coinbase exchange betrayal is a solid example of just how bad large exchange platforms are. In terms of privacy and security of funds, they’re the exact opposite of what crypto should be. After all, nobody reads the terms of service and the user will always get the worst deal possible.
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Curb Your Privacy
According to a new report, by The Intercept, Coinbase exchange is licensing an analytics software meant to extract information about blockchain transactions. Based on the report, the Homeland Security Investigations wing of Immigration and Customs Enforcement (ICE) has purchased this tool by the name of Coinbase Tracer. Funny enough, the software is up for sale for both government and private sector. So, the next time Coinbase CEO takes on Twitter to talk about Satoshi’s vision or decentralized finance and anonymity, remember that capitalism will prevail.
Basically, Coinbase Tracer is a data analytics software as previously named Coinbase Analytics. The name change occurred back in April 28th for the intelligence-gathering tool. The software is available for both the law enforcement and corporate compliance. Essentially, what is does is providing the ability to sift through all the transaction data available on public blockchains.
The contract with ICE dates back to August of last year. Recently, Jack Poulson from the Tech Inquiry watchdog organization gained access to details through a Freedom of Information Act (FOIA) request. The initial software apparently cost $29,000 followed by a software purchase worth upwards of $1.3 million.
Ironically, the FOIA document reveals that ICE has access to data from a dozen crypto assets. This includes Bitcoin (BTC) and Ethereum (ETH). As for ICE, they have not responded on what they do with the information.
The Compliant Coinbase Exchange
Lately, Coinbase exchange has not been doing so hot. It is under heavy fire for mismanagement, layoffs, and shocking statements from the management team. During the latest crypto crash, there was growing concern that exchange platforms can keep the investor’s cryptocurrencies and halt withdrawals. Once again, this is not farfetched as it actually happened multiple times. Therefore, during these times of extreme fear in the market, this news will also be a kick in the guts for Coinbase.
Coinbase has a history of working with US government and regulatory bodies. So far, they have been having contracts with the Secret Service, DEA and IRS. And of course, ICE is another name on their partner list.
Coinbase founder and CEO Brian Armstrong made an effort to explain about this analytics tool scandal.
“There is a lot that could be better about existing AML [anti-money laundering] laws, and we didn’t create them – but those are the rules to operate a fiat-to-crypto exchange legally.
Whether Coinbase sells blockchain analytics software or not, transactions on public blockchains are still traceable by any number of people out there.
We (at Coinbase) often feel somewhat caught in the middle on this one – we maintain relationships with both the traditional financial world, and the new crypto world, because we act as a bridge between the two.”
With the recent revelations, Coinbase provided The Intercept with a link to its compliance page with the following disclaimer,
“Coinbase Tracer sources its information from public sources and does not make use of Coinbase user data.”
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