Coinbase (NASDAQ:COIN) is asking the US Treasury Department to update the existing anti-money-laundering rules, claiming that ongoing innovation instead of stricter enforcement measures is the answer to dealing with the rise of illicit finance in the nasent web3 and digital assets space.
Coinbase Chief Legal Officer Paul Grewal stated via social media that when bad actors innovate in financial crime, then good guys also have to keep innovating in order to keep up. These comments from Grewal were complemented by the firm’s extensive response to the Treasury’s request for comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets.”
When bad guys innovate in financial crime, good guys need innovation to keep pace. @coinbase filed a response to @USTreasury‘s Request for Comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets” to underscore this reality and 4 particular reforms UST…
— paulgrewal.eth (@iampaulgrewal) October 20, 2025
Coinbase’s filing asserts that the Bank Secrecy Act (BSA), which is a very old 1970 law requiring FIs to report seemingly suspicious transactions to the government, and applicable rules are now really outdated and usually become counterproductive. Due to these shortcomings, consumers are often targeted as their personal data may be compromised. And too often, not enough is done to prevent financial crime and bad actors.
Coimbase’s suggestions include forming so-called regulatory “safe harbors” for companies that are leveraging AI algorithms as well as API-powered monitoring tools, acknowledging decentralized IDs and ZKPs as qualified types of customer verification, and supporting know-your-transaction DLT analytics as a superior way for identifying suspicious transfers instead of more conventional banking industry reporting methods.
Coinbase had also asked for more public–private sector cooperation via different regulatory pilot programs and sandboxes. This may enable crypto platforms and various organizations to fully test out potential compliance frameworks prior to creating applicable guidelines.
Coinbase also stated that updates must prioritize results / outcomes instead of trying to enforce strict rules, emphasizing that the current BSA guidelines tend to burden authorities with meaningless reports. They also force companies to collect and maintain large amounts of user-data.
This latest filing has been unveiled during a time when Washington is considering just how exactly crypto regulations need to be implemented.
The Senate Banking Committee Democrats had shared a draft proposal intended to curb illicit activities carried out via DeFi platforms — an initiative that was called into question by Republicans and certain web3 professionals who claimed that it may completely ban decentralized finance and crypto wallet innovations.
