Coinbase Demands US Treasury Deploy Blockchain & AI to Crush Crypto Crime

Wall Street's worst nightmare just got a tech upgrade—and regulators are finally catching up.

The Enforcement Revolution

Coinbase isn't asking politely anymore. The exchange giant's pushing Washington to weaponize the very technologies that built crypto—blockchain's transparent ledger combined with AI's pattern recognition creates an unholy alliance against financial crime.

Tracking the Untraceable

Imagine algorithms that flag suspicious transactions before they clear—while blockchain's permanent record makes money laundering as obvious as a neon sign. Traditional compliance teams move at bureaucratic speed; this system operates at network velocity.

The Regulatory Irony

Nothing says 'progress' like watching government agencies scramble to adopt technologies they spent years misunderstanding. Maybe next they'll realize decentralized finance doesn't actually run on cartoon hamster wheels.

The future of enforcement isn't bigger rulebooks—it's better code. And for once, the regulators might actually keep up.

Coinbase Calls US AML Rules Outdated

Coinbase’s filing describes the current AML system as outdated and inefficient, noting that it often floods regulators with low-value reports while forcing firms to store excessive amounts of customer data.

The company claims this approach both compromises privacy and fails to deter sophisticated criminal operations.

Instead, Coinbase proposes a results-driven approach that leverages modern technologies to improve monitoring and enforcement.

Among its key recommendations, Coinbase urged Treasury to establish regulatory “safe harbors” for companies using AI and API-driven compliance tools, recognize decentralized IDs and zero-knowledge proofs as legitimate forms of customer verification, and promote know-your-transaction (KYT) blockchain analytics as a superior alternative to traditional reporting.

Third: Amend the Bank Secrecy Act’s customer identification requirements to include decentralized identification and zero-knowledge proofs as part of an approved identification verification process. 4/6

“Blockchain and other innovative technologies can counter these emerging risks,” Grewal wrote, adding that Treasury should actively promote the adoption of digital tools to identify and deter illicit activity.

He said this WOULD align with the objectives of the Anti-Money Laundering Act of 2020, which sought to modernize the BSA.

Coinbase also called for regulatory sandboxes to allow exchanges and agencies to jointly test compliance innovations before formal implementation.

The company believes public–private collaboration could accelerate progress and provide clearer guidance for firms seeking to deploy AI or blockchain-based tools in AML systems.

Faryar Shirzad, Coinbase’s Chief Policy Officer, echoed this sentiment, writing that the government should “follow in the footsteps of crypto exchanges” by embracing innovation rather than resisting it.

“Modernize AML with proven digital tools like AI, APIs, digital IDs, and blockchain analytics,” he urged.

At @coinbase, we’re constantly modernizing our defense systems to protect our customers and national security. The government’s approach to combating financial crime should be no different. That’s why policymakers should embrace innovation to modernize AML with proven digital… https://t.co/82GfJSzRDs

Top Crypto CEOs to Meet Senate Democrats as Crypto Bill Talks Stall

As reported, a high-profile meeting between leading crypto executives and Senate Democrats is set for Wednesday, led by Senator Kirsten Gillibrand, in an effort to revive progress on long-delayed U.S. crypto market structure legislation.

Gillibrand, one of the few Democrats vocal about providing regulatory clarity for digital assets, co-sponsored the Responsible Financial Innovation Act with Senator Cynthia Lummis and has remained a central figure in bipartisan crypto policy efforts.

Executives from Coinbase, Chainlink, Ripple, Galaxy Digital, Uniswap, Circle, Kraken, a16z Crypto, Jito, and the solana Policy Institute are expected to attend the closed-door roundtable, according to journalist Eleanor Terrett.

The discussions come amid DEEP partisan divides in Congress, with competing bills from Democrats and Republicans outlining different visions for regulating crypto assets and assigning oversight to the SEC and CFTC.