Is Coinbase selling customer data to the US Government?
Alleged reports suggest that several U.S. government agencies have been purchasing customer data from the crypto exchange
In September 2021, crypto currency exchange Coinbase signed a $1.36 million three year contract with the U.S. Immigration and Customs Enforcement (ICE) branch of the Homeland Security Department, for the use of its blockchain analytics software - Coinbase Tracer.
This was the largest federal contract signed by the company.
According to the project documents, ICE will use Coinbase’s software to track crypto activity of illegal immigrants and criminals.
In August 2021, ICE also paid the company $29,000 for its “computer forensics software”. Coinbase was given the contract on the basis that they are “the only vendor who can reasonably provide the services required by the agency”.
Information about the project is scarce, as the same document states,
“This requirement is LAW ENFORCEMENT SENSITIVE, therefore minimal information will be provided publicly.”
Coinbase have also been partnering with other departments of the U.S. government. It is reported that between May 2020 and April 2021, the Drug Enforcement Agency (DEA), Internal Revenue Service (IRS) and the Secret Service purchased licenses to the Coinbase Tracer.
Now its alleged that the crypto exchange platform has been selling customer geolocation data to the U.S. Government. The claims have since been denied by the company.
In a twitter statement, Coinbase clarified that “all Coinbase Tracer features use data that is fully sourced from online, publicly available data and do not include any personally identifiable information for anyone, or any proprietor customer data”.
The company also explained that its tracer tools are created to comply with government requirements and is used to investigate financial crimes conducted on the platform.
Although this is not the first time Coinbase Tracer has met with controversy.
In 2019, Coinbase purchased Neutrino, the blockchain intelligence firm behind the development of the Coinbase analytics software, for $13.5 million. Neutrino members have previously been linked to working with hackers who sold spyware to the governments of Saudi Arabia, Sudan and Venezuela.