- Coinbase urges the U.S. government to adopt blockchain analytics, Artificial Intelligence (AI), and modern technology to fight financial crime in crypto.
- The company advocates for regulatory exceptions to encourage the use of AI and Application Programming Interfaces (APIs) in anti-money laundering (AML) efforts.
- Coinbase requests clear guidance for recognizing decentralized IDs and zero-knowledge proofs as valid customer verification methods.
- Concerns over the lack of standardization and regulatory clarity currently limit the adoption of AI and APIs in AML programs.
- An alternative proposal suggests creating a direct communication system between law enforcement and crypto firms to improve investigations without broad surveillance.
Coinbase has called on the U.S. government to use blockchain analytics, artificial intelligence (AI), and other advanced technologies to reduce illegal activity in the cryptocurrency sector. This appeal came in response to the U.S. Treasury Department’s recent request for public input on preventing illicit actions involving digital assets.
In a letter dated Oct. 17 from Coinbase‘s chief legal officer, Paul Grewal, the company emphasized that money laundering techniques have become more complex through advanced technology. Grewal stressed that government agencies need to adopt these modern tools to counteract such risks. “Blockchain and other innovative technologies can counter these emerging risks. Treasury and other policymakers should promote their use to identify and deter illicit activity,” he wrote.
The letter also suggested the Treasury consider regulatory exceptions under the Bank Secrecy Act for companies that use AI and API-based monitoring systems. Grewal explained that the safe-harbor conditions should concentrate on governance and results rather than applying a uniform model. He noted that companies hesitate to fully use AI in their AML processes due to unclear regulations. Additionally, the letter called for guidance to resolve issues related to APIs, including a lack of standardization and fragmented rules, by defining acceptable uses and data privacy standards.
Further, the letter urged the Treasury to provide official guidance recognizing decentralized identities (IDs) and zero-knowledge proofs as valid forms of customer verification. It also recommended support for blockchain analytics clustering in AML compliance. Grewal added that updated guidance should encourage sharing information about suspicious blockchain activities while avoiding excessive recordkeeping demands on transaction participants.
Separately, a public policy expert proposed establishing a communication system to allow law enforcement agencies direct access to crypto firms for investigations. According to this view, such a system could maintain or enhance investigative capabilities without relying on costly, broad financial surveillance.
The Treasury had previously issued a notice on Aug. 18 seeking comments on innovative methods to detect illicit digital asset activities, as mandated by the GENIUS Act. The comment period closed last Friday.
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