Coinbase to Provide $ 1.36M Blockchain Analytics Tool to US BIB

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The US Department of Homeland Security’s Immigration and Customs Service paid $ 1.36 million for a license to use Coinbase Analytics to track cryptocurrency transactions.

Cryptocurrency exchange Coinbase has signed an agreement with the US Department of Homeland Security to allow the use of the analytical tool Coinbase Analytics. For its part, the Department of Homeland Security’s Department of Immigration and Customs Enforcement (ICE) licenses Coinbase Analytics for government surveillance purposes. Contract price $ 1.36 million.

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Coinbase Analytics provides publicly available data on the Coinbase blockchain to analyze cryptocurrency exchange transactions. Using data from the analytical tool Coinbase, the ICE supervisor will be able to link cryptocurrency transactions with real objects, de-anonymize users and investigate fraudulent activities using blockchain technology.

With reference to the confidentiality of the relationship, the parties avoid disclosing the details of the agreement. It remains unclear what data Coinbase Analytics will use ICE to conduct forensics. It also does not disclose what information will be analyzed or transmitted from Coinbase.

Criticism of Coinbase’s cooperation with supervisors

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The controversy that Coinbase may be transferring user information to third parties and the US federal government has been going on for a long time. Coinbase CEO Brian Armstrong has been accused of blocking and blacklisting anonymous transactions. In 2019, disgruntled crypto enthusiasts even boycotted the Coinbase exchange and launched the #DeleteCoinbase social media campaign in response to the exchange’s acquisition of the blockchain analysis platform Neutrino.

A new round of negative emotions from users was caused by the appearance in the media of information about Coinbase’s cooperation with US law enforcement and regulatory authorities. Users believe that Coinbase provides a comprehensive tool for the government to gain insight into all cyberspace activities. Thus, the deep principles laid down in the creation of cryptocurrencies are violated, and their personal confidentiality is under threat.

In response to criticism, Brian Armstrong assures privacy advocates that Coinbase Analytics does not provide any information other than what is publicly visible on the blockchain along with aggregated results.

Food for thought

In 2019, Coinbase acquired analytics company Neutrino because they believed it was the best provider of blockchain analysis software at the time.

It soon became clear that the founders of Neutrino were the same people who led the Hacking Team. Next, you should pay attention to who became one of the first copyright holders of the license for Coinbase Analytics – the US Secret Service. It is possible to make an assumption who was the real initiator of the acquisition of technology for the development of special spyware for collecting compromising information.

In 2020, Coinbase entered into a 4-year contract for $ 183,750 with the US Secret Service to use Coinbase Analytics tools. The contract gives the Secret Service the ability to use its blockchain forensics tools. Initially, information about the cooperation was hushed up, but after the Coinbase deal with the Secret Service got into the media, Brian Armstrong was forced to make an official statement regarding Coinbase Analytics.

Armstrong began by saying that, firstly, he did not find anything related to Coinbase analytics worthy of news. He further noted that the creation of this service actually has a positive effect on the growth of his company and the crypto industry in general, and that they do not provide any other information other than what is already available.

In a tweet, Brian Armstrong admitted:

“Create such an opportunity [аналитический инструмент] very expensive and we want to recoup the costs. There is a market for blockchain analytics software, so we sell it like everyone else. Ultimately, this helps us build relationships with law enforcement, which is important for the development of the cryptocurrency community.

– Brian Armstrong (@brian_armstrong) 12 july 2020»

Armstrong later deleted this post due to a strong wave of negative comments and criticism.

Other government agencies interested in using analytical tools from Coinbase Analytics include the Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS), which previously paid Chainalysis $ 625,000 to develop a tool to de-anonymize Monero.

Various assumptions can be made about the reasons that prompted Coinbase to cooperate with the supervisory authorities. Either the management of the cryptocurrency exchange was “made an offer that cannot be refused,” or Coinbase entered the category of trusted, and possibly completely state-controlled, cryptocurrency companies.

However, it does not matter which of these hypotheses is correct. We can say that the period of anarchy and all-encompassing crypto-freedom is coming to an end. The total cryptocurrency market capitalization is close to $ 2 trillion. This is a strong enough incentive to increase interest in the industry on the part of supervisors. Therefore, in countries where the legislative and technological framework allows the state not to prohibit cryptoassets, but to effectively exercise supervisory functions, it actively takes control of the cryptoindustry.

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