The cryptocurrency exchange Coinbase urges the U.S. government to use blockchain analysis, artificial intelligence, and other modern technologies to combat financial crimes in the sector, in response to the Treasury's request for comments on how to prevent illegal activities involving cryptocurrencies.
In a letter written by Chief Legal Officer Paul Grewal (dated October 17, shared on the X platform on Monday), he argues that money laundering schemes are becoming increasingly complex through the use of advanced technologies, and law enforcement needs to follow suit to address them.
He added, "Doing so will support a key objective of the 2020 Anti-Money Laundering Act, which aims to modernize the Bank Secrecy Act."
Coinbase's Chief Policy Officer Faryar Shirzad reiterated this position in a post on X on Monday, stating that the U.S. government should emulate cryptocurrency exchanges and embrace "innovation to modernize anti-money laundering efforts through proven digital tools such as artificial intelligence, APIs, digital identity, and blockchain analysis."
One of the measures Grewal hopes the Treasury will consider is providing regulatory exemptions for companies using AI and API-driven monitoring tools under the Bank Secrecy Act.
In a follow-up post on X on Monday, he stated, "The conditions for this safe harbor should focus on governance and outcomes rather than imposing a one-size-fits-all approach."
According to Grewal, businesses have been reluctant to fully unleash the potential of AI in anti-money laundering measures due to a lack of regulatory clarity.
He also noted that APIs face challenges such as a lack of standardization and regulatory fragmentation, and that guidelines outlining "acceptable use cases" would address this issue by clearly showing "data privacy requirements and interoperability standards, enabling businesses to confidently adopt APIs and integrate them into their projects."
Meanwhile, Grewal hopes the Treasury will issue guidance recognizing and incentivizing decentralized identity and zero-knowledge proofs as valid forms of customer verification, as well as the use of blockchain analysis clustering for anti-money laundering compliance.
Grewal added, "Updated guidance should further encourage the sharing of information related to potential illegal activities routed through blockchain, while being careful not to impose excessive record-keeping obligations on everyone involved in blockchain transactions."
In a notice on August 18, the U.S. Treasury sought comments on innovative approaches to detecting illegal activities involving digital assets under the GENIUS Act, with the comment period closing last Friday.
At the same time, Jim Harper, a non-resident senior fellow at the American Enterprise Institute, took a different approach.
In his blog post on Monday (which drew from a paper he pushed on September 15 advocating the same idea), he argued for the establishment of a communication system that would allow law enforcement to directly query cryptocurrency companies for investigative purposes.
He said, "Such a system would maintain or enhance law enforcement capabilities while eliminating the existing broad and costly financial monitoring regime."
Related: U.S. government shutdown approaches fourth week, Senate Democrats plan cryptocurrency roundtable
Original article: “Coinbase urges U.S. government: Embrace blockchain technology to effectively combat crypto crime”
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