Coinbase founder and CEO Brian Armstrong says he wants to clear the air on why his company is selling blockchain analytics software to the US government.
In a series of tweets, Armstrong says the leading crypto exchange needs to recoup software development costs, and he believes working with law enforcement strengthens cryptocurrency adoption as a whole.
“There is a lot that could be better about existing AML laws, and we didn’t create them – but those are the rules to operate a fiat to crypto exchange legally.
In the early days, Coinbase started off by using some of the existing blockchain analytics services out there. This worked out ok, but the issue with it was that we don’t like sharing data with third parties when we can avoid it, and they didn’t support all the features/chains we needed. So we realized at some point we would need to bring this capability in house.
We did this via an acquisition (which did not go very well honestly, and we had to cycle out some team members). But we were able to rebuild the team, and set up this functionality in house.
It’s expensive to build this capability, and we want to recoup costs. There is an existing market for blockchain analytics software, so we sell it to a handful of folks as well. It also helps us build relationships with law enforcement which is important to growing crypto.
Especially if you want more fiat in the world to flow into crypto over time (as I do). Blockchain analytics software is essentially just compiling publicly available data that is already out there on the blockchain, trying to organize it to make it more useful.”
According to Armstrong, bridging the gap between the emerging world of crypto and traditional financial and regulatory ecosystems is a delicate balance, and working with the existing system is the best way forward.
“Whether Coinbase sells blockchain analytics software or not, transactions on public blockchains are still traceable by any number of people out there. We (at Coinbase) often feel somewhat caught in the middle on this one – we maintain relationships with both the traditional financial world, and the new crypto world, because we act as a bridge between the two.
These groups sometimes have different ethos, but it’s important we provide that bridge to keep the flow of fiat and crypto working.
That’s the only way we’re going to get to a truly crypto-to-crypto economy which can have all sorts of new improvements (including better financial privacy).”
Armstrong says crypto users looking for complete privacy should look to the altcoin market, where coins like Monero and Zcash are striving to offer total transaction anonymity.
“If people want true privacy, that is what privacy coins are for. I’m a fan of privacy coins because I think everyone should have more financial privacy. It will be similar to how the internet moved from HTTP to HTTPS over time.”