Coinbase is the largest crypto exchange in the United States. According to documents, Coinbase is set to partner up with ICE (Immigrations and Customs Enforcement) to implement a suite of tools for the identification of crypto users and transaction tracking. ICE purchased a single analytics license from Coinbase for $29,000 in August 2021, followed by a software purchase potentially worth $1.36 million the next month. The softwares and tools are provided by Coinbase Tracer, formerly known as Coinbase Analytics.
Tracer allows users in both the public and private sectors to trace transactions on the blockchain, a distributed ledger of transactions integral to cryptocurrencies. Despite blockchain ledgers typically being public, the enormous amount of data stored therein makes following the money from spender to recipient exceedingly difficult, if not impossible, without software tools. Tracer is marketed by Coinbase for corporate compliance and law enforcement investigations, touting its ability to “investigate illicit activities including money laundering and terrorist financing” and “connect [cryptocurrency address] locations with real-world entities.”
According to the Freedom of Information Act request, ICE is now able to track transactions made through more than a dozen different digital currencies, including Bitcoin, Ether, and Tether. ICE’s analysis features include “Multi-hop link analysis for incoming and outgoing funds,” giving it insight into the transfers of these currencies, as well as “Transaction demixing and shielded transaction analysis” aimed at thwarting methods users take to launder their funds or hide their transactions. Additionally, the contract promises “Historical geo-tracking data,” but it’s unclear what exactly this data is or where it comes from. The email obtained through FOIA shows that Coinbase did not require ICE to sign an End User License Agreement, legalese that limits what a customer can do with software.
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During the past few years, Coinbase has made a concerted effort to pitch its intelligence features to government agencies, including the IRS, Secret Service, and Drug Enforcement Administration. John Kothanek, Coinbase’s vice president of global intelligence, testified before a congressional panel earlier this month that his company was eager to help Homeland Security. “If you are a cyber criminal and you’re using crypto, you’re going to have a bad day. Coinbase’s work with the government has proved highly controversial among crypto fans, perhaps owing both to the long-running libertarian streak in that community and to the fact that these currencies are so frequently used to perpetrate fraud.
Coinbase Tracer was born out of controversy. Motherboard reported that Neutrino, a blockchain-analysis firm Coinbase acquired to create Coinbase Tracer, “was founded by three former employees of Hacking Team, a controversial Italian surveillance vendor that was caught selling spyware to countries with dubious human rights records.” After public outcry, Coinbase announced these employees would “transition out.” ICE’s Homeland Security Investigations, the division that purchased Coinbase, handles not only immigration-related matters, including migrant raids and deportations, but also transnational crimes, including financial crimes. Coinbase’s use by ICE is unclear.
When asked about the ICE contract and the data involved, Coinbase spokesperson Natasha LaBranche directed The Intercept to a disclaimer on its website stating “Coinbase Tracer sources its information from public sources and does not make use of Coinbase user data.” LaBranche did not answer questions about how ICE is using Coinbase Tracer, nor if the company imposed any limits to that use.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
