The platform monitors transactions on Bitcoin to reveal illegal operations. Coinbase also negotiated its services with entities such as the DEA and the IRS.
Once again, Coinbase is in the eye of the hurricane due to its specialized software for blockchain analysis, which allows monitoring transactions on Bitcoin and other networks.
The controversy has raged after the exchange agreed on last May a government contract with the US Secret Service, an agency that is part of the Department of Homeland Security.
The agreement will allow the Secret Service to use Coinbase’s analysis software, a tool that could help them with their investigations against financial crimes. According to public records, the contract will grant the company around USD 183,750 for its services, which will be enabled until 2024.
The exchange already faced strong criticism in early July, due to two government offers that it received from the Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS). Both entities were interested in using Coinbase’s blockchain analysis software, even negotiating a USD 250,000 contract.
Currently, these negotiations are dormant, possibly due to the closing of a contract with the US Secret Service. However, it is not the first time that one of these authorities has tried to contract services to monitor networks such as Bitcoin. The IRS recently stated that it was seeking tools focused on tracking private transactions on the Lightning Network.
Uncomfortable Blockchains Analysis, according to Coinbase CEO
Blockchain analysis services are not new in the cryptocurrency market since there are companies specialized in tracking transactions and spying on networks like Bitcoin. However, due to the privacy principles with which Satoshi Nakamoto created this blockchain, many members of the community are against this type of practice.
Brian Armstrong, CEO of Coinbase, highlighted this ambivalence on his Twitter account in response to the controversy. The businessman stated that platforms to monitor networks like Bitcoin have existed for a long time. However, he said that Coinbase decided to develop its software a few years ago to avoid sharing sensitive information with third parties.
Armstrong thinks that it is necessary to meet all the basic requirements of the Anti-Money Laundering (AML) standards since the exchange operates under a license in the USA. For this reason, they hired the services of companies dedicated to analyzing transactions to avoid illegal operations on their platform, until they acquired the intelligence agency Neutrino.
The purchase of Neutrino in 2019 also caused a stir of opinions in the ecosystem, since several of its members received accusations of participating in the spyware firm Hacking Team. That same year, Coinbase decided to separate from these professionals and develop the Coinbase Analytics service on their own.
Brian Armstrong adds that the information on this software has always remained separate from Coinbase’s internal data since it only monitors public data from networks such as Bitcoin. In this way, he says that anyone can monitor transactions and that this is the “true privacy of private currencies”.
By Alexander Salazar
