Crypto exchange Coinbase has called on the U.S. government to adopt blockchain analytics, artificial intelligence, and other modern tools to combat financial crime in the crypto sector.
In a letter dated Oct. 17 and shared on X, Coinbase’s chief legal officer Paul Grewal responded to the Treasury Department’s request for feedback on curbing illicit activity in crypto. He noted that money laundering schemes are becoming more advanced through the use of cutting-edge technologies — and law enforcement must evolve to keep pace.
“Blockchain and other innovative technologies can counter these emerging risks. Treasury and other policymakers should promote their use to identify and deter illicit activity.”
“Taking this approach would advance a key goal of the Anti-Money Laundering Act of 2020 — to modernize the Bank Secrecy Act,” Grewal added.
Echoing this sentiment, Coinbase’s chief policy officer Faryar Shirzad wrote on X that the U.S. government should follow the lead of crypto exchanges and “embrace innovation to modernize AML with proven digital tools like AI, APIs, digital IDs, and blockchain analytics.”
Regulatory clarity for AI and APIs crucial to fighting financial crime
Grewal urged the Treasury Department to consider creating a regulatory exemption under the Bank Secrecy Act for companies that use AI- and API-powered monitoring tools.
“The conditions for such a safe harbor should prioritize governance and measurable outcomes, rather than imposing a one-size-fits-all model,” he explained in a follow-up post on X.
Grewal noted that many companies remain cautious about fully deploying AI in anti–money laundering (AML) programs due to a lack of regulatory clarity.
He added that APIs face similar hurdles — including limited standardization and regulatory fragmentation — and suggested that Treasury issue guidance “outlining acceptable use cases.” Such clarity, he said, would define data privacy requirements and interoperability standards, enabling firms to confidently adopt and integrate APIs into their compliance systems.
Clearer rules needed for blockchain technology
Grewal also urged Treasury to issue guidance that recognizes and incentivizes the use of decentralized IDs and zero-knowledge proofs as legitimate tools for customer verification and blockchain analytics clustering in AML compliance.
“The updated guidance should encourage the sharing of information relevant to potential illicit activity on blockchains,” he said, “while avoiding overly burdensome recordkeeping requirements for everyone involved in a blockchain transaction.”
In its Aug. 18 notice, the U.S. Treasury invited public comments—closing last Friday—on innovative ways to detect illicit activity involving digital assets, as mandated by the GENIUS Act.
Think tank proposes direct communication system
Separately, Jim Harper, a non-resident senior fellow at the American Enterprise Institute, offered a different solution. In a Monday blog post based on his Sept. 15 paper, he proposed creating a communication system that would allow law enforcement agencies to directly query crypto firms for investigative purposes.
“Such a system,” Harper argued, “would preserve or even enhance law enforcement capabilities while eliminating the need for today’s broad and costly financial surveillance regime.”
