Crypto community horrified by Coinbase’s IRS/DEA analytics play

On Friday, The block reported that cryptocurrency exchange that Coinbase was looking for license for its blockchain analysis software to United States federal agencies – notably the Drug Enforcement Agency (DEA) and the Internal Revenue Service (IRS).

A Coinbase spokesperson said Decrypt that “This tool only provides them with streamlined access to publicly available data and at no time has access to internal or customer data from Coinbase.”

But put Coinbase, the IRS, DEA and talk about ‘identity attribution’ together in a story, and it’s no surprise that people across the crypto and blockchain industry are baffled at the prospect of the popular exchange in cahoots with federal agencies.

Jameson Lopp, co-founder and Chief Technical Officer of Bitcoin key security company Casa had one of the strongest formulated and most shared tweet responses, to write: “This is no surprise, our mistrust in you is heightened, we will make your analysis software redundant.”

Crypto trader Josh Rager pointed out a Whale Alert tweet noting that 6000 Bitcoin had just been moved from Coinbase, to write: “Millions of dollars seem to be leaving Coinbase right now. Investors and traders are no longer limited to Coinbase or Bitmex. If you screw up customers, participate in shady deals or don’t improve the product, customers can now go elsewhere to trade / invest. ”

That’s just the tip of the iceberg for Twitter. Bitcoin entrepreneur Matt Odell tweeted to Coinbase CEO Brian Armstrong and asked, “Why do you hate your customers so much?” And The Crypto Lark believed“A real downhill slide since they played WikiLeaks.”

Decrypt has reached out to Coinbase about the controversy and will update this story accordingly.

This is not the first time that Coinbase has encountered controversy and criticism. The aforementioned suspension of WikiLeaks’ Coinbase account in April 2018 caused some anger, but the larger public backlash came last year when a # DeleteCoinbase movement started on social media.

And in March 2019, Coinbase acquired Neutrino, the blockchain analytics provider mentioned in IRS documentation. Three of the company’s board members were involved in Hacking Team, a company that sold spyware to oppressive regimes in Saudi Arabia, Sudan and Venezuela.

Coinbase in the end fired those board membersbut the same week, said a Coinbase director that a previous analysis partner had sold customer data. In any case, the confluence of controversies led to a significant setback.

Will the hashtag #DeleteCoinbase be dusted again? It all depends on how Coinbase handles the latest PR disaster.

Editor’s Note: A previous version of this article indicated that a Coinbase manager claimed that Elliptic had sold the customer data. This was incorrect and we regret the mistake.

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