This article reveals the true essence of well-known bitcoin service Coinbase work. The company constantly strengthens its AML/KYC rules, meticulously imitating banking system within the framework of cryptocurrency space.
Complaints against Coinbase
Everything started about 6 months ago when the phenomenon of discontent among Coinbase customers firstly appeared. In the world of fiat money, criticism of financial institutions, such as banks, insurance companies, tax and other offices, is usual practice, since working process is controlled by people and is not anonymous. When it comes to crypto-industry, complaints against centralized exchanges is an anomaly, especially, given that computer-based systems, supporting anonymity, are not able to monitor customers’ actions. There is a bunch of complaints concerning Coinbase on Reddit that cannot be found about any other company in this area.
Obviously, not all exchanges are under full automatic control and completely anonymous. People, who establish and administrate cryptocurrency exchange platforms, can be faced down anytime. Therefore, operators try to integrate as many automation and anonymization tools as possible. Moreover, in some cases, company’s employees do not have any access to user’s funds or data, as for example at Blockchain.info, or Protonmail.com. It is considered to be one of the best levels of anonymization – records are end-to-end encrypted and the server data access is available only to the password owner.
The core of the problem
It seems that Coinbase disrespects rules of anonymity, storing private wallet keys on their unprotected servers. In general, this system is no different from the traditional banking:
- monitors how customers spend bitcoins purchased on the Coinbase website;
- freezes payments;
- blocks accounts;
- steals money from accounts (repays after indefinite period);
- gives away clients’ data and transaction details to foreign authorities, in particular to FBI;
- what is the worst – ignores customer’s requests for months!
Coinbase users already know that customer support is not replying for weeks sometime, so if being ignored they post the problem on Reddit, where it is noticed and solved. Well, the case is not addressed immediately, but as soon as the discussion reaches hundreds of voices, support workers react right away, apologizing and trying to fix situation somehow.
At the beginning of August 2016, the user claimed that Coinbase took $12, 000 from his account and closed it, and later notified that he can withdraw funds anytime. However, it did not work out, since the funds were frozen and customer support was silent.
Eventually, it turned out that right after the confirmation of US citizen’s documents the account was blocked, presumably because the user at the time was in Ukraine and used local IP.
Another story is about the $25, 000 theft, when the crypto-exchange closed client’s account and requested fund transfer to another bitcoin address. As in the first case, the customer was not able to make transaction. After sending 3 tickets to customer support and waiting 4 days, he added the link with the similar story to his post on Reddit. At the end of the message he wrote – ”DO NOT USE COINBASE.”
About 3 months ago, one Reddit user asked – why is everyone bashing Coinbase? He listed a number of the service advantages, but forgot to mention the lack of anonymity and sufficient automation tools to trust exchange/wallet.
Later, the user commented that initially his purchase limit was reduced from several thousands to $500 per night, and then to $25.
One more client sold $5,800 worth BTC, however, $2,490 has never been deposited to his account. As usually, commentators advised to write the post directly on Reddit.
“Coinbase threatened to block our customer’s account after him making the cryptocurrency deposit and placing bet on the website.”
The popular torrent website was available in the network since 2009 and was in the list of the best torrent domains along with PirateBay. US authorities were assisted by Homeland Security, Facebook, LinkedIn, as well as by the bitcoin exchange Coinbase, in the process of capturing lawbreaker – the torrent site’s admin.
The founder of KAT turned out to be Ukrainian, who ran the website with the help of few mates. After years of prosecution by lawyers, “copyrasts” and security-service agents, he was arrested in Poland. The domain registration data provided a lot of information about the owner — Artem Vaulin, Kharkov city, Ukraine.
In the capturing of “dangerous terrorist”, or better to say “dangerous torrentist”, Facebook acted together with Apple, once again proving company’s willingness to violate the civil rights for the sake of total surveillance. Both services provided the Artem’s social media logs where he showed up from time to time to advertise his website, and made payments in iTunes, using the same IP address 22.214.171.124.
As a result, $13, 000 worth of bitcoin were taken away from Artem in favor of copyrasts. In total Artem received donation of about $72,000,000 worth of bitcoin. So now, authorities just need to find the way to seize remaining funds.
Consequently, almost any Western company, despite its Constitution, can give away one’s information and funds. Taking into account that bitcoin was designed to confront regulation and supervision, it is crystal clear that Coinbase has no place on top of the bitcoin industry.
Unconditional trust of Coinbase customers, who have not been cheated yet, should vanish into thin air. Even if there is no chance of cryptocurrency user being involved in any suspicious activities, it is important to comply with anonymity measures, at least those that allow to avoid direct accusations.
Coinbase is almost the only exchange that adheres to the legislative requirements, delays payments for periods ranging from 4 up to 10 days, freezes accounts, puts off responses from customer service and tracks down one’s network history. In other words, it deals with everything that contradicts the ideology of libertarianism and crypto-anarchy.