Coinbase Reinforces Its Compliance Rules - Essay Example

In the past two years, Coinbase has paved the way for the advancement of Bitcoin.

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Their efforts have convinced several mainstream corporations to embrace Bitcoin including Mozilla Firefox, Time Magazine and the United Way.

With that done and dusted, Coinbase is now shifting its focus on introducing another mainstream element to the Bitcoin community. This mainstream component is compliance.

Since Coinbase is an American Corporation, situated in California’s Bay Area, its users enjoy certain advantages and face a few disadvantages.

Convenient and swift integration with the banking system undoubtedly falls under the category of advantages. In sharp contrast, the potential for government over regulation and data mining is a clear drawback for the users.

Many bigger corporations, in the past have fallen victim to the “Big Brother” situation.

Due to the fact the gambling regulation, Coinbase have banned Bitcoin use for online gambling websites.

According to Reddit users, when Coinbase users removed their BTC from SatoshiBet.com, they found out that their accounts were closed down due to a violation of the “Terms of Service” clause.

Another reddit source tells us that Coinbase has also deactivated the accounts of users who have purchased cannabis using coins bought from their service.

“I have been a long time Coinbase customer, buying 1-3 times per month, I got an e-mail today saying they are banning me from using their services because of a ToS violation.

I emailed them back to ask what the violations were and they told me that they had evidence that I used some of the BTC I bought for cannabis/cannabis seeds. They gave me a specific BTC transaction and said it was for drugs and wouldn’t listen to anything I had to say.”

Furthermore, Coinbase closed down accounts of those users who traded Bitcoins at LocalBitcoins.com. The following quotation sheds light on the issue.

Because I buy a few bitcoins a week from Coinbase (although sometimes I will go months without buying any) I was flagged as having enough volume to potentially be a Money Services Business (MSB). The Coinbase ‘compliance team’ mounted an investigation against me.

They determined ‘they had reason to believe’ I am selling Bitcoins on LocalBitcoins, even though they haven’t said what that reason is, and therefore are suspending my account.”

With so much controversy in the air, Coinbase defended approach by saying that that they are simply making an effort to act in accordance with the litany of anti money laundering and drug laws in the United States. This explanation is vague given the fact that online gambling, using LocalBitcoin.com or purchasing marijuana is not outlawed everywhere.

Speculation suggests that Coinbase are trying to stay in the good books of the authorities in the overly regulated United States. Some experts believe that Coinbase are slowly facilitating intrusive government regulation.

Coinbase was a trusted brand in the Bitcoin community. However, with growing concern about their “spying” motives, it seems that they might as well become yet another medium for government agenda and unethical domestic regulations.