Michaela
Crypto exchange Coinbase has called on the U.S. government to modernize financial crime prevention by integrating blockchain analytics, artificial intelligence (AI), and Application Programming Interfaces (API) into federal compliance frameworks. The company also proposed creating safe harbors to let firms use these tools to meet anti–money laundering (AML) and counter–terrorism financing standards.
Key points:
- Coinbase urged the U.S. government to modernize financial crime prevention by integrating blockchain analytics, AI, and APIs into existing anti–money laundering and counter–terrorism frameworks.
- The exchange proposed four reforms, including regulatory safe harbors for AI, clearer guidance for API-driven compliance, and recognition of decentralized ID and zero-knowledge proofs.
- Chief Legal Officer Paul Grewal stressed that regulators must innovate as rapidly as bad actors to maintain effective financial oversight.
In a formal response to the U.S. Department of the Treasury’s request for comment on innovative methods to detect illicit activity involving digital assets, Coinbase submitted a letter authored by Chief Legal Officer Paul Grewal. The filing outlined four key reforms the company believes the Treasury and Congress should adopt to strengthen oversight and improve the nation’s approach to financial crime in the digital asset sector.
Grewal later summarized the proposals in a post on X, noting that one of the first steps the U.S. government could take is to establish a regulatory safe harbor under the Bank Secrecy Act. This framework, he said, would protect firms that responsibly use AI to enhance anti–money laundering compliance, including transaction monitoring and the filing of Suspicious Activity Reports (SARs). “The conditions for that safe-harbor should focus on governance and outcomes, as opposed to forcing a one-sized-fits-all model,” Grewal added.
Coinbase also recommended that regulators issue formal guidance defining expectations for API-driven AML technologies. The exchange said such guidance should clarify acceptable use cases, data privacy obligations, and interoperability standards to ensure consistent adoption across the financial sector.
The crypto exchange further proposed amending the Bank Secrecy Act’s customer identification rules to recognize decentralized identity solutions and zero-knowledge proofs as valid methods for verifying user identities.
Finally, Coinbase recommended that the government issue guidance formally endorsing and incentivizing the use of Know-Your-Transaction screening and blockchain analytics clustering as more effective tools for meeting AML compliance standards.
“The US needs [to] move on this [now],” Grewal wrote at the end of the X thread, reiterating his stance that as bad actors advance their methods of financial crime, regulators and compliant firms must innovate just as quickly to stay ahead.
Coinbase’s recommendations come as U.S. regulators intensify their scrutiny of digital asset platforms, with policymakers weighing how to balance innovation with oversight. Whether the Treasury takes up these proposals could signal how open Washington is to integrating emerging technologies into the country’s financial crime framework.
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Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
