Coinbase is pushing the U.S. Treasury to embrace blockchain, AI, and decentralized identity systems to revolutionize anti–money-laundering efforts, aiming to crush illicit finance without throttling innovation or ceding fintech dominance.
Coinbase Urges Treasury to Modernize AML Rules Using AI and Blockchain
Coinbase Global Inc. (Nasdaq: COIN) called on the U.S. Department of the Treasury on Oct. 17 to overhaul outdated anti-money laundering (AML) rules through the adoption of blockchain analytics, artificial intelligence (AI), and decentralized identity (DiD) systems. The crypto exchange said these technologies can strengthen oversight of illicit finance without stifling innovation. Its response to the Treasury’s Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets aligns with the administration’s digital finance goals under Executive Order 14178.
Chief Legal Officer Paul Grewal said that modernizing compliance through blockchain and zero-knowledge proofs (ZK Proofs) could reduce data risks and improve accuracy in financial monitoring. Coinbase urged the Treasury to create safe-harbor provisions under the Bank Secrecy Act (BSA) for institutions using compliant API- and AI-based systems, while also recognizing DiD as a valid form of identity verification. The company also pressed for greater clarity around Know Your Transaction (KYT) monitoring and for regulatory sandboxes to encourage testing of new compliance tools. Coinbase stated:
We urge Treasury and Congress to prioritize enforcement efforts against non-compliant offshore entities and to modernize outdated regulatory frameworks, leveraging blockchain’s inherent transparency and emerging privacy-preserving technologies.
“By fostering collaboration between industry and regulators, we can enhance the effectiveness of AML efforts, protect consumer privacy, and ensure the United States remains a leader in responsible digital asset innovation.”
The company’s response concluded by underscoring the need for joint regulatory and industry efforts to balance innovation with enforcement. Coinbase noted:
“Regulators can better support the fight against illicit finance by focusing on certain industry participants’ non-compliance with existing regulations, ensuring consistent enforcement efforts, and supporting the adoption of decentralized identity tools.
“In turn, industry should be willing to work with governments to develop sound, constructive regulations. By encouraging novel and collaborative approaches to combating illicit finance, regulators can make regulatory and law enforcement efforts more effective while not deterring new innovations in financial services,” the crypto firm said. Coinbase maintained that these reforms would enable the U.S. to maintain leadership in financial technology while improving AML efficiency.
FAQ 🧭
- How does Coinbase propose modernizing AML compliance? Coinbase advocates for AI, blockchain analytics, and decentralized identity to enhance AML accuracy and reduce compliance burdens.
- What regulatory changes is Coinbase asking the Treasury to implement? Coinbase seeks safe-harbor provisions, regulatory clarity on KYT, and recognition of DiD as valid identity verification under the BSA.
- Why is Coinbase pushing for AML innovation now? The exchange wants the U.S. to lead in responsible digital finance innovation while strengthening oversight of illicit activity.
- What role does decentralized identity play in Coinbase’s proposal? Coinbase believes DiD can preserve privacy while meeting compliance standards and enhancing trust in digital asset systems.
Author: Kevin Helms
Source: Bitcoin
Reviewed By: Editorial Team
