Last Updated: 30 June 2022
Coinbase provides geodata to the US Immigrations & Customs Enforcement (ICE). This immigration and customs service can track bitcoin transactions which have taken place via the Coinbase platform. Transactions involving ether and stablecoin Tether can also be tracked, reports The Intercept. This media outlet is basing its findings on confidential documents shared with them by privacy watchdog, Tech Inquiry.
Distressingly, Coinbase does not provide its customers with an opt-in option to use their data; ICE can use all customer data without permission.
The US exchange is a multi-headed monster. Not only do they sell crypto currencies, but they also sell tracing software to governments and companies under the name Coinbase Tracer. ICE has a licence of this specialised software for $29,000, which helps in linking personal data with transactions on the bitcoin blockchain. The Homeland Security Investigations unit has also purchased Coinbase Tracer software for $1.36 million.
It turns out that Coinbase, the largest crypto exchange in the US, is directly selling tools to U.S law enforcement & immigration agencies to help track peoples’ crypto transactions.https://t.co/rkyRvNdp9c
— Avi Asher-Schapiro (@AASchapiro) June 29, 2022
Bitcoin transactions are pseudonymous on the network, but within Coinbase’s wall, customers are required to identify themselves through a KYC procedure. This makes it possible to link certain transactions to people.
According to Jack Poulson, director of privacy watchdog, Tech Inquiry, ICE has access to a wide range of forensic functions through the Coinbase Tracer software package. This is an intelligence gathering tool from the company (previously known as Coinbase Analytics).
Coinbase Tracer allows customers, both in government and the private sector, to track transactions through the blockchain. The software helps to detect and select ‘suspicious’ transactions. In the eyes of Coinbase, they are not doing anything wrong. They help governments and other companies to tackle money laundering and terrorist financing.
Within the contract that ICE has concluded with Coinbase, so-called “Multi-hop link analyses for incoming and outgoing crypto currencies” are possible. Also, for example, the “de-mixing” of transactions that have passed through a mixer is possible. But, the retroactive analysis of “historical geo-tracking data” is possible also. A salient point: ICE has not asked Coinbase’s customers for permission to analyse and use their data.
According to Coinbase, they use public sources and customer data is not used.
Coinbase is listed on the Nasdaq and is considered the largest bitcoin and crypto exchange in America. Parties such as MicroStrategy buy their bitcoin via Coinbase Prime, the company’s brokerage arm.