One of the major causes of concern for Coinbase’s customers is the exchange’s relationship with law enforcement agencies and governments. The company provided some disclosure recently on how much interest the government had shown in its customers’ details. The first ‘Transparency Report’ was published by the Silicon Valley crypto exchange, which highlighted the extent to which they had cooperated with law enforcement agencies and governments regarding turning over their customers’ information. It was confirmed by the report that around 1,914 requests had been submitted by law enforcement agencies to the exchange in the first half of 2020.
Of these requests, nearly 97% had been linked to criminal investigations. According to the report, the largest number of requests had been submitted by U.S. agencies, as they sent around 1,113 requests. Almost 441 of the total requests had been submitted by authorities in the United Kingdom whereas the number of requests originating from Germany was 441. The remaining of the requests were from regulators scattered globally. As far as law enforcement agencies are confirmed, Coinbase disclosed that the Federal Bureau of Investigation (FBI) was responsible for the majority of the requests for information. Data was requested by the FBI a total of 340 times.
In contrast, around 184 requests were made by the Department of Homeland Security Investigations. 180 requests were made by local state agencies, while the fourth-place was taken with 104 requests by the Drug Enforcement Administration (DEA). Some of the other agencies that were also on the list included the Securities and Exchange Commission (SEC), the Secret Service, the Justice Department, and more. It is worth noting that Coinbase didn’t elaborate as to how many requests it had granted. However, there is a good chance that the exchange cooperated with most of the agencies. The Chief Legal Officer at Coinbase, Paul Grewal said that most of the requests had been submitted in the form of search warrants, subpoenas, and court orders.
Considering the weight of these legal procedures, it is difficult to believe that the exchange wouldn’t have yielded do the requests. Grewal stated that the legitimate interests of these authorities were worth respecting because they were targeting bad actors who abuse the platform and other people. Hence, they wouldn’t hold back where it was appropriate. This cooperation with the government is in accordance with Coinbase’s aim to become more regulatory compliant. It understands the importance of establishing relationships with law enforcement and this approach has greatly benefitted the exchange.
Earlier this year, the exchange announced that it had reached 35 million users. This growth is mostly because of its Coinbase Pro platform that operates in almost every state of the U.S., even ones that have tough regulatory requirements, such as New York. However, there has also been a lot of pushback over this regulator-friendly approach. In June, there were reports that Coinbase was talking with the IRS and the DEA to sell them licenses for its top web tool, Coinbase Analytics and customers had balked at this immediately.