Coinbase is calling on the U.S. Treasury Department to overhaul decades-old anti-money-laundering rules, arguing that innovation rather than heavier enforcement is the key to combating illicit finance in digital assets.
“When bad guys innovate in financial crime, good guys need innovation to keep pace,” Coinbase Chief Legal Officer Paul Grewal said in an X post accompanying the company’s 30-page response to Treasury’s request for comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets.”
The exchange’s filing argues that the Bank Secrecy Act (BSA), a 1970 law requiring financial institutions to report suspicious transactions to the government, and related rules are outdated and often counterproductive, exposing consumers’ personal data while doing little to stop criminal networks.
The company’s recommendations include establishing regulatory “safe harbors” for firms using AI and API-driven monitoring tools, recognizing decentralized IDs and zero-knowledge proofs as valid forms of customer verification, and endorsing know-your-transaction blockchain analytics as a more effective method for detecting illicit flows than traditional bank reporting.
Coinbase (ticker COIN) also called for greater public–private collaboration through regulatory sandboxes that would allow exchanges and agencies to test new compliance models before formal rule making. The company said reforms should focus on outcomes rather than rigid mandates, reiterating that existing BSA requirements flood regulators with low-value reports while forcing firms to collect and store vast amounts of customer data.
The filing arrives as Washington debates how far new crypto oversight should go. Senate Banking Committee Democrats recently circulated a draft proposal aimed at preventing illicit activity through decentralized finance — a measure that drew criticism from Republicans and industry leaders who warned it could “effectively ban” DeFi and wallet development.
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