Coinbase – A cryptocurrency exchange that is no different from centralized institutions and traditional financial systems.
Everyone in the cryptocurrency space has heard of Coinbase at least once, even if they have not directly engaged with the platform. The exchange was regarded as the biggest exchange in the space, registering over 50k customers on a daily basis in 2017.
More so, it grabbed the attention of both the trading financial market and decentralized market when a news article by the Washington Post stated that the exchange had over 20 million users (much more than the second largest broker-dealer firm, Charles Schwab and Fidelity Investments, one of the largest asset managers). The exchange had also brought in a revenue of $1.3 billion.
Apart from its user base, the exchange was known for being a regulatory-compliant platform and its stringent rules in terms of the tokens listed. The exchange was also working towards making the platform more institution-friendly by introducing products and services that serve them the best. Overall, it seemed like the exchange was doing almost everything right, up until Neutrino.
A little background of Coinbase-Neutrino scene
Neutrino is an Italian-based blockchain analytics firm that was recently acquired by Coinbase. However, instead of accepting this news, a vast majority of the cryptocurrency community lashed out against the exchange platform, even starting the #DeleteCoinbase movement on leading social media platform such as Twitter and Reddit.
The reason for the movement? Previous association with Hacking Team.
Hacking Team is a firm that sold surveillance tools to private institutions and government authorities. Among them were also governments with poor human rights records, including Saudi Arabia and Venezuela. Reportedly, Hacking Team was also under listed among the five ‘Corporate Enemies of the Internet’ by RSF.
Surprisingly, it turned out that the core team of Neutrino was formerly a part of Hacking Team and would soon start working for Coinbase, thereby leading to #DeleteCoinbase.
Did the Neutrino scandal stop here? No.
But, did the firm address this problem? Yes. Brian Armstrong, CEO and co-founder of Coinbase released an official statement pertaining to this issue.
The Big scandal surrounding Coinbase-Neutrino
In what seemed to be a frail attempt at mending relations with its customers, the Director of Institutional Sales, Christine Sandler, spoke about why Coinbase acquired Neutrino despite knowing its connections to Hacking Team, in an interview with Cheddar.
Reason: Industry leading best-in-class technology.
Now remember, most people prefer giving the good news before the bad. This situation went through a similar process.
Right after stating that reason, the Director stated that the “compelling” reason for the acquisition was that their blockchain analytics providers were selling their client data to outside sources/third-party firms. This acquisition would allow the platform to regain control over customers’ data, she further said.
Interesting catch, it has been over ten days since the exchange announced the acquisition. Over ten days! And, not a single word about this to its customers, considering that they would have known about the data breach for a much longer time.
For anyone who has forgotten the most common reaction of the cryptocurrency space during the Facebook-Cambridge Analytics scandal, here’s a reminder,
Even if Coinbase is not based on blockchain, it is still a major player in the blockchain and cryptocurrency space.
Earlier today, the CEO of Coinbase, Brian Armstrong published an official statement addressing the Coinbase-Neutrino-Hacking Team scandal. In his statement, he said that blockchain analytics was one of the key pieces required for an exchange associated with banks, implementing KYC and AML programs.
Armstrong stated that that they were previously associated with several vendors for blockchain analytics services. However, these vendors did not support all the assets they wanted to have on the platform.
Statement issued: “So, we knew at some point we would need to bring this capability in house. We examined the players, found that Neutrino had some of the best technology in this area and decided to acquire them.”
Statement implied: Do not want to address the client data breach topic. So, we are going to make some reasonable excuse that everyone would probably not question.
Statement issued: “However, we had a gap in our diligence process. While we looked hard at the technology and security of the Neutrino product, we did not properly evaluate everything from the perspective of our mission and values as a company.”
Statement implied: Did not think the association with Hacking Team would be such a huge issue for the community. Like, what was the big deal?
“We took some time to dig further into this over the past week, and together with the Neutrino team have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase. “
Statement implied: We wanted the #DeleteCoinbase campaign to stop spreading like wildfire. Even waited for some time for it to die down; but that did not happen so we decided to cut the team previously associated with Hacking Team loose.
“This was not an easy decision, but their prior work does present a conflict with our mission. We are thankful to the Neutrino team for engaging with us on this outcome.”
Statement implied: We are doing this only because of the pressure from the community. #Cantloseoutonmoreusers, so we are going to do something we don’t want to and by doing so, try to look great in the users’ perspective.
The grand conclusion
The above statement by Brian Armstrong had a very interesting conclusion,
“Bitcoin -and crypto more generally - is about the rights of the individual and about the technological protection of civil liberties. Coinbase seeks to be the most secure, trusted, and legally compliant bridge to cryptocurrency.”
This was followed by,
“We sometimes need to make practical tradeoffs to run a modern, regulated exchange, but we did not make the right tradeoff in this specific case. We will fix it and find another way to serve our customers while complying with the law.”
The second sentence of the conclusion is something the platform has used in the past, “most secure, trusted, and legally compliant bridge to cryptocurrency.” Coinbase has been a regulatory-compliant exchange and the exchange cooperates with government agencies, if required [P.S. The 13,000 customer data revealed to the IRS because of court order] but there were still users who believe in decentralization using the platform.
Now, read the very first sentence of the conclusion again – “Bitcoin -and crypto more generally - is about the rights of the individual and about the technological protection of civil liberties” – and ask yourself, does Coinbase really stand for this? The CEO not only failed to take any action to inform users about the client data sale, but also failed to address the very existence of it.
The post Coinbase makes a joke of its own mission; fails to address important questions appeared first on AMBCrypto.