Coinbase Demands US Regulators Deploy AI & Blockchain to Crush Crypto Fraud
Wall Street's sleeping giants finally get a wake-up call from crypto's front lines.
The Tech Arsenal Against Digital Scammers
Coinbase just handed regulators a blueprint they should've drafted years ago. Artificial intelligence tracking suspicious patterns across blockchains. Distributed ledgers creating audit trails even the slickest fraudsters can't manipulate. Real-time monitoring systems that spot pump-and-dumps before the dump happens.
Regulatory Irony at Its Finest
The same institutions that spent years warning about crypto's risks now need its underlying technology to police those risks. Blockchain's immutable nature makes fraud evidence permanent. AI algorithms process transaction volumes that would overwhelm human teams. The tools exist—regulators just need to stop treating them like forbidden magic.
The Compliance Revolution
Forget paperwork mountains and delayed reports. We're talking about smart contracts that automatically flag anomalous activity. Machine learning models that adapt to new scam tactics faster than bureaucrats can schedule meetings. A system where compliance happens in real-time, not quarterly filings.
Maybe if traditional finance had embraced this tech sooner, we wouldn't need bailouts every decade—but hey, that's just the crypto talking.
Grewal calls on the US government to use cutting-edge technologies
Earlier, Coinbase’s chief legal officer highlighted that blockchain and other cutting-edge technologies are essential in addressing emerging dangers in the crypto ecosystem. Therefore, he urged that the Treasury and other policymakers should encourage their use to identify and stop illegal activities.
“This WOULD align with a primary objective of the Anti-Money Laundering Act of 2020, which aimed to update the Bank Secrecy Act,” he continued.
Faryar Shirzad, a Chief Policy Officer, weighed in on the topic of discussion. In an X post, Shirzad greatly supported Grewal’s view, arguing that the US government needs to draw inspiration from crypto exchanges by utilizing reliable digital tools, such as AI, APIs, digital IDs, and blockchain analytics, to update and improve its anti-money laundering efforts.
As one of Grewal’s several recommendations for the Treasury, he wants the government department to consider establishing a special rule under the Bank Secrecy Act for businesses that use AI and Application Programming Interfaces (APIs) driven monitoring tools.
In a follow-up post on X on Monday this week, he mentioned that the criteria for that SAFE harbor should focus on governance and outcomes instead of applying a one-size-fits-all approach.
Coinbase’s chief legal officer made these remarks after he observed that companies have been hesitant to fully use AI in anti-money laundering efforts because of unclear regulations in place. He also expressed that APIs face challenges like inconsistent standards and regulatory differences.
Hence, Grewal suggests that offering clear guidelines on acceptable use cases would be beneficial. This is because it would clearly define data privacy requirements and standards for interoperability, boosting the confidence of firms to adopt and integrate APIs into their systems.
The Treasury’s recommended guidelines sparks controversy in the crypto ecosystem
Coinbase’s chief legal officer also wants the Treasury to provide guidelines that acknowledge and encourage the use of decentralized IDs and zero-knowledge proofs as legitimate forms of customer verification, in addition to blockchain analytics clustering for compliance with anti-money laundering laws.
This recommendation was made after Grewal noted that the new guidance should encourage the sharing of information related to potential illicit activities involving blockchains, while ensuring that those involved in a blockchain transaction are not dealing with too much record-keeping.
Meanwhile, in its notice dated August 18, the US Treasury had asked the public for comments on innovative methods to identify crypto-related illegal activities as required by the GENIUS Act.
Jim Harper, a non-resident Senior Fellow at the American Enterprise Institute, shared a different perspective. He argued that a system should be established for communication, enabling law enforcement agencies to ask crypto firms for details required in their investigations directly.
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