September 26, 2022

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Leaked Contract Reveals Coinbase May Be Providing User Data To Law Enforcement Agencies

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Leaked Contract Reveals Coinbase May Be Providing User Data To Law Enforcement.

A report by The Intercept suggests that Coinbase may be offering user data to US Immigrations and Customs Enforcement agency (ICE), as indicated by a leaked contract provided by watchdogs Tech Inquiry.

According to the contract, the leading US exchange, through its analytic program Coinbase Tracer will be providing the ICE with “historical geo tracking data,” amongst others, to aid the law enforcement unit in tracking crypto transactions. The leak provides significant insight into the $1.37 million contract signed by the exchange with the US Department of Homeland Security unit in September 2021.

However, a spokesperson of the leading exchange has refuted claims that this data is being taken from Coinbase users. The spokesperson directed The Intercept to a disclaimer on the company’s website: “Coinbase Tracer sources its information from public sources and does not make use of Coinbase user data.”

However, questions remain on the free reign of use the government agency is given over the analytics tool. It is noted that the ICE was not subject to an End User License Agreement, limiting how the agency can use the software, a standard procedure for such deals. The contract with the ICE is just one of the firm’s numerous deals with law enforcement agencies, putting it in the bad books of some crypto faithful who use the technology because of the reduced government oversight.

Coinbase Tracer itself is rooted in a controversial past. Neutrino, which Coinbase took over in 2019 to create the tool, was formerly run by hackers notorious for selling data to questionable regimes. The latest revelation adds to the list of controversies surrounding the exchange in 2022. 

The firm had come under fire in May as excerpts of a new user agreement revealed that users would lose access to their funds should the exchange go bankrupt. Notably, veteran trader Peter Brandt who has historically been known to be critical of the exchange has warned users against holding their digital assets on the platform.

It is worth noting that a recent press release from the EU reveals that regulators in the bloc may require extensive reporting of customer transactions and data, so law enforcement can trace crypto transactions to fight money laundering and terrorism funding. 

Notably, Coinbase has been one of the vocal detractors of the said rules.

Coinbase has been one of the worst hit by the crypto downturn this year. Its share prices have fallen significantly, with Goldman Sachs expecting Coinbase’s revenue to drop by 60%. Earlier in June, the company laid off over 1000 workers to reduce costs.

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