Coinbase Calls for AI and Blockchain Integration in AML Reform

• Coinbase urges Treasury to update AML laws for AI, APIs, and blockchain compliance.
• Proposal seeks safe-harbor for AI use and guidance for decentralized ID verification.
• Coinbase calls for recognition of KYT and blockchain analytics in AML oversight.

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Coinbase has urged the U.S. Department of the Treasury to modernize anti-money laundering (AML) regulations to include artificial intelligence (AI), blockchain analytics, and decentralized identity verification. In its official response to the Treasury’s Request for Comment on Innovative Methods to Detect Illicit Activity Involving Digital Assets, Coinbase proposed targeted updates under the Bank Secrecy Act (BSA) that would help regulators and financial institutions strengthen compliance while keeping pace with innovation.

Coinbase stated that current AML frameworks lag behind the rapid evolution of financial crime, where digital assets and global transaction networks demand faster, data-driven detection methods. The company stated that blockchain technology and AI can provide effective tools to counter illicit activities, improve transaction monitoring accuracy, and reduce compliance costs.

Coinbase Proposes Four Major AML Reforms

Coinbase’s proposal outlined four specific reforms for Treasury and Congress to consider. The first reform calls for a regulatory safe-harbor within the BSA, allowing institutions to use AI responsibly to improve AML systems.

Coinbase said this structure should focus on outcomes and strong governance instead of enforcing a single compliance model. The safe-harbor, it noted, would encourage firms to adopt AI for real-time monitoring, pattern recognition, and suspicious activity reporting while maintaining oversight and accountability.

The second proposal focuses on establishing guidance for API-driven AML compliance technologies. Coinbase said APIs are now vital for connecting monitoring systems, blockchain analytics platforms, and sanctions databases.

By setting clear expectations for API use, Treasury could help institutions confidently integrate real-time compliance solutions. The company suggested defining data privacy requirements, acceptable use cases, and standards for interoperability to reduce uncertainty and promote adoption across the sector.

Coinbase Highlights Role of Decentralized Identity Systems

In its third reform, Coinbase urged regulators to recognize decentralized identification (DiD) and zero-knowledge proofs (ZK Proofs) as approved methods for verifying customer identities under the BSA. These technologies, it argued, can provide secure and efficient identity verification without requiring repeated document submissions.

Coinbase also proposed expanding the existing “reliance” framework to allow regulated entities to share verified digital identities, creating an interoperable ecosystem that enhances security and efficiency in AML operations.

Blockchain Analytics for Stronger AML Oversight

Coinbase’s fourth recommendation calls for official recognition of blockchain analytics and Know-Your-Transaction (KYT) screening as valid methods for ongoing AML monitoring. The company said Treasury should explicitly identify KYT and blockchain clustering as risk-based techniques that improve transparency and accuracy in detecting illicit finance.

Coinbase’s Chief Legal Officer, Paul Grewal, stated that innovation in financial crime prevention must advance as rapidly as criminal methods evolve. He noted that the Treasury’s willingness to explore new detection technologies provides an opportunity to align regulatory frameworks with the realities of modern finance.