Coinbase Urges US Treasury to Leverage Blockchain, AI to Combat Crypto Crime

Coinbase has called on the US Treasury Department to modernize anti-money-laundering (AML) regulations, saying decades-old frameworks like the Bank Secrecy Act (BSA) are no longer effective in addressing the rapidly evolving world of digital ￰1￱ Takeaways: Coinbase is urging the US Treasury to update outdated AML rules, arguing that current frameworks fail to address ￰2￱ company recommends using AI, APIs, and blockchain analytics to detect illicit activity more ￰3￱ proposes regulatory sandboxes and safe harbors to encourage ￰4￱ of relying on stricter enforcement, the company argues that innovation through blockchain analytics and artificial intelligence should form the foundation of future financial crime prevention.

“When bad guys innovate in financial crime, good guys need innovation to keep pace,” said Paul Grewal, Coinbase’s Chief Legal Officer, in an X post accompanying the exchange’s 30-page response to Treasury’s request for comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets.” Coinbase Calls US AML Rules Outdated Coinbase’s filing describes the current AML system as outdated and inefficient, noting that it often floods regulators with low-value reports while forcing firms to store excessive amounts of customer ￰5￱ company claims this approach both compromises privacy and fails to deter sophisticated criminal operations.

Instead, Coinbase proposes a results-driven approach that leverages modern technologies to improve monitoring and ￰6￱ its key recommendations, Coinbase urged Treasury to establish regulatory “safe harbors” for companies using AI and API-driven compliance tools, recognize decentralized IDs and zero-knowledge proofs as legitimate forms of customer verification, and promote know-your-transaction (KYT) blockchain analytics as a superior alternative to traditional reporting. Third: Amend the Bank Secrecy Act’s customer identification requirements to include decentralized identification and zero-knowledge proofs as part of an approved identification verification process. 4/6 — ￰7￱ (@iampaulgrewal) October 20, 2025 “Blockchain and other innovative technologies can counter these emerging risks,” Grewal wrote, adding that Treasury should actively promote the adoption of digital tools to identify and deter illicit ￰8￱ said this would align with the objectives of the Anti-Money Laundering Act of 2020, which sought to modernize the ￰9￱ also called for regulatory sandboxes to allow exchanges and agencies to jointly test compliance innovations before formal ￰10￱ company believes public–private collaboration could accelerate progress and provide clearer guidance for firms seeking to deploy AI or blockchain-based tools in AML ￰11￱ Shirzad, Coinbase’s Chief Policy Officer, echoed this sentiment, writing that the government should “follow in the footsteps of crypto exchanges” by embracing innovation rather than resisting it.

“Modernize AML with proven digital tools like AI, APIs, digital IDs, and blockchain analytics,” he ￰12￱ @coinbase , we’re constantly modernizing our defense systems to protect our customers and national ￰13￱ government’s approach to combating financial crime should be no different. That’s why policymakers should embrace innovation to modernize AML with proven digital… ￰0￱ — Faryar Shirzad (@faryarshirzad) October 20, 2025 Top Crypto CEOs to Meet Senate Democrats as Crypto Bill Talks Stall As reported, a high-profile meeting between leading crypto executives and Senate Democrats is set for Wednesday, led by Senator Kirsten Gillibrand, in an effort to revive progress on long-delayed ￰14￱ market structure legislation.

Gillibrand, one of the few Democrats vocal about providing regulatory clarity for digital assets, co-sponsored the Responsible Financial Innovation Act with Senator Cynthia Lummis and has remained a central figure in bipartisan crypto policy ￰15￱ from Coinbase, Chainlink, Ripple, Galaxy Digital, Uniswap, Circle, Kraken, a16z Crypto, Jito, and the Solana Policy Institute are expected to attend the closed-door roundtable, according to journalist Eleanor ￰16￱ discussions come amid deep partisan divides in Congress, with competing bills from Democrats and Republicans outlining different visions for regulating crypto assets and assigning oversight to the SEC and CFTC.