The United States Secret Service purchased blockchain analytics software from cryptocurrency exchange desk Coinbase.
What Happened
According to public documents, the Secret Service awarded a four-year contract worth $183,750.00 to Coinbase in May, the Block reported Saturday.
Coinbase has been looking to sell its analytics software to other federal agencies, including the Internal Revenue Service and the Drug Enforcement Agency, as well.
The company had controversially acquired blockchain intelligence firm Neutrino February last year.
Coinbase Faces Flak From Cryptocurrency Community
The move faced criticism from the cryptocurrency community on social media as Coinbase also collects private user data as part of the anti-money-laundering requirements on its platforms. The users expressed concerns that the contract could lead to the breach of privacy of virtual currency traders who use Coinbase.
The company’s Chief Executive Officer Brian Armstrong, in a series of tweets explaining his position, said the blockchain analytics software “uses publicly available data to try and track crypto transactions – usually to catch bad actors.”
According to Armstrong, selling the software also helps Coinbase recoup costs involved in its acquisition of Neutrino.
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.
— Brian Armstrong (@brian_armstrong) July 12, 2020
Jesse Powell, CEO of fellow cryptocurrency exchange desk Kraken, said that selling blockchain analytics software nevertheless presents a conflict of interest.
“Michael Gronager left [Kraken] to start [Chainalysis.] We chose not to develop this business internally, and we chose not to invest in analytics firms because I never wanted to have a conflict of interest with our clients. I didn’t want to profit from selling out your financial privacy, ” Powell noted in a tweet.
A report last week suggested Coinbase is planning to undergo an initial public offering in the U.S. as early as this year.
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