Coinbase Calls on US to Harness AI and Blockchain Against Crypto Crime

Coinbase has called on the U.S. Treasury Department to adopt modern technologies such as blockchain analytics and artificial intelligence to combat illicit activity in the cryptocurrency industry. The exchange’s leadership emphasized that using cutting-edge tools could help modernize the country’s financial crime prevention framework, aligning it with the evolving digital asset landscape.

• Coinbase urged the U.S. Treasury to use blockchain analytics and AI to fight crypto-related financial crime.
• Paul Grewal called for regulatory clarity to support innovation in AML compliance tools like APIs and AI.
• The exchange wants decentralized IDs and zero-knowledge proofs recognized as valid compliance mechanisms.
• Coinbase believes modernizing AML laws aligns with the goals of the Anti-Money Laundering Act of 2020.
• Think tank experts proposed creating a communication system between crypto firms and law enforcement.

In a letter sent on Oct. 17 by chief legal officer Paul Grewal, Coinbase responded to the Treasury Department’s request for public feedback on new methods to deter illicit crypto activity. Grewal noted that money laundering operations have evolved with technology, and regulators must do the same to effectively detect and prevent financial crime.

He added that embracing innovation would advance the main objective of the Anti-Money Laundering Act of 2020, which seeks to modernize the Bank Secrecy Act. Coinbase’s chief policy officer, Faryar Shirzad, echoed this message on X, stating that government agencies should adopt digital tools such as AI, APIs, digital IDs, and blockchain analytics to strengthen AML systems.

Regulatory clarity for AI and APIs in anti-money laundering

Grewal proposed that the Treasury introduce a regulatory exception under the Bank Secrecy Act for firms that use AI and Application Programming Interfaces (APIs) to monitor transactions. He suggested that any safe-harbor rules focus on governance and measurable outcomes rather than rigid, one-size-fits-all models.

Source: Paul Grewal

According to Grewal, companies have hesitated to deploy AI in AML compliance due to unclear regulations. Similarly, APIs face obstacles like inconsistent standards and fragmented oversight. Clear guidance defining acceptable use cases, data privacy expectations, and interoperability standards could help firms confidently integrate such tools into their compliance programs.

Blockchain and decentralized IDs need clear compliance rules

Coinbase also urged the Treasury to issue guidance recognizing decentralized identities and zero-knowledge proofs as valid mechanisms for customer verification and blockchain-based compliance. The company argued that promoting blockchain analytics and privacy-preserving technologies could enhance oversight without burdening all participants with excessive recordkeeping requirements.

The Treasury’s request for public comment, published Aug. 18 and now closed, was issued under the GENIUS Act, which mandates exploring innovative methods to detect illicit activity involving digital assets.

Think tank proposes direct communication framework

Meanwhile, Jim Harper, Senior Fellow at the American Enterprise Institute, proposed establishing a communication network where law enforcement can directly query crypto firms for investigative data. In his view, such a system could maintain law enforcement’s capabilities while reducing reliance on widespread financial surveillance.

This article was originally published as Coinbase Calls on US to Harness AI and Blockchain Against Crypto Crime on Crypto Breaking News – your trusted source for crypto news, Bitcoin news, and blockchain updates.