Coinbase Urges US Officials: Blockchain Isn’t The Enemy — It’s The Solution

Coinbase has urged US regulators to update how they fight financial crime in the crypto space, arguing modern tools can give law enforcement clearer leads while cutting low-value paperwork for honest firms.

According to a letter dated October 17, 2025, the company asked Treasury officials to accept new approaches that use blockchain analytics, artificial intelligence, APIs, decentralized identifiers and privacy-preserving proofs.

The filing is part of a public comment process tied to a Treasury notice seeking ideas on “Innovative Methods to Detect Illicit Activity Involving Digital Assets.”

Coinbase Pushes Tech-Friendly Rules

In the submission, which runs about 30 pages, Coinbase’s Chief Legal Officer Paul Grewal proposed several practical steps. Reports have disclosed requests for safe-harbor testing zones where firms could try new monitoring tools without immediate enforcement risk.

When bad guys innovate in financial crime, good guys need innovation to keep pace. @coinbase filed a response to @USTreasury‘s Request for Comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets” to underscore this reality and 4 particular reforms UST…

— paulgrewal.eth (@iampaulgrewal) October 20, 2025

The company asked Treasury to recognize decentralized IDs and zero-knowledge proofs as valid ways to verify customers, and to support standardized APIs so exchanges and regulators can share the right data.

Grewal wrote, “When bad guys innovate in financial crime, good guys need innovation to keep pace.” That line was used to underline the company’s point that traditional, form-driven reporting can miss real threats.

At @coinbase, we’re constantly modernizing our defense systems to protect our customers and national security. The government’s approach to combating financial crime should be no different. That’s why policymakers should embrace innovation to modernize AML with proven digital… https://t.co/82GfJSzRDs

— Faryar Shirzad (@faryarshirzad) October 20, 2025

Why Coinbase Says Change Is Needed

According to Coinbase, current rules under the Bank Secrecy Act generate vast amounts of suspicious activity alerts, many of them low value, and leave both firms and regulators overwhelmed.

The firm argued a results-based approach would focus on outcomes — like whether illicit activity was actually detected and stopped — instead of forcing specific, often outdated methods on every actor.

Reports show Coinbase also framed this as a national competitiveness issue, pointing to a white paper from its policy arm titled “The National Security Case for Crypto and Blockchain.”

At the same time, privacy advocates and some civil liberties groups have raised red flags. Blockchain tracing can expose transaction links that were previously harder to discover, and activists worry about overreach.

Coinbase told Treasury it wants fewer blanket data grabs and more targeted, meaningful reporting — a move it says would protect privacy while improving enforcement.

Featured image from Gemini, chart from TradingView