Coinbase Sells its Analytics Tool to Immigration Department

Coinbase has secured a deal to provide its blockchain analytics software to the US Immigration and Customs Enforcement division (ICE). As per the deal, Coinbase will receive $455,000 from the department and may garner up to $1.36 million if the deal stays in place over the next three years.

It is worth noting that the ICE, a branch of Homeland Security, has settled with Coinbase even after the company’s recent falling-out with the SEC. Ostensibly, Coinbase aims to build relationships with law enforcement to help grow its business. 

Coinbase Signs Contract with US Customs Enforcement Agency

Under the contract, Coinbase has pledged to deliver “application development software as a service” for the ICE.

This is not the first time Coinbase has secured a deal with the ICE. In August, the firm was selected by ICE to provide “computer forensics services” to the agency under a contract worth $30,000. 

Furthermore, the Secret Service had also partnered with Coinbase. In July 2020, Coinbase secured a four-year contract with the Secret Service worth $183,750, also providing the department with its blockchain analytics software. 

A “Bizarre” Partnership

Alex Gladstein, chief strategy officer at the Human Rights Foundation, has said the compensation is quite low compared to the reputation risk it poses to Coinbase. He tweeted:

“This isn’t very much money for Coinbase in the grand scheme of things. Strange that they would risk much reputationally such a relatively small sum.”

However, some countered that Coinbase may have struck the deal with the intention of building relationships with law enforcement to get US governmental departments on its side and win over the SEC. On September 8, CEO Brian Armstrong revealed that the SEC warned it would sue the company if it launches its Lend program. 

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HS to Track Money Laundering Using Coinbase Analytics

It is not disclosed in the filings how the ICE aims to use Coinbase’s blockchain forensic tool. However, it is speculated that the department could use the tool to track money laundering and investigate fraudulent blockchain activities.

Coinbase claims its analytics tool can power “crypto compliance for governments, financial institutions, and crypto businesses.” Among other things, the tool connects cryptocurrency transactions to real-world entities, monitors risk on millions of addresses, and explores fraudulent activity across Bitcoin, Ethereum, and other blockchains.

Nevertheless, the tool has been criticized by some that claim it collects private information, tracks customer transactions, and sells the data to law enforcement. However, Coinbase claims the analytics tool “sources its information from public sources and does not make use of Coinbase user data.”

It is worth mentioning that Coinbase is unlikely to have struck these deals to raise money, having recently sold $2 billion worth of junk bonds in an offering that saw over $7 billion worth of bids placed. This was not the first time Coinbase saw huge interest in its business. In mid-April, when the company went public, it received a valuation of around $100 billion, rivaling the behemoths of traditional finance like Goldman Sachs. 

Why do you think Coinbase is interested in securing deals with governmental departments? Let us know in the comments below.