Coinbase asks U.S. Treasury to allow AML system using AI and blockchain

Coinbase has asked the U.S. Treasury to reform rules to allow it to introduce a new anti-money laundering (AML) system that uses artificial intelligence (AI) and blockchain technology.

On the 20th (local time), The Block reported that Paul Grewal, Coinbase's chief legal officer (CLO), emphasized, "If financial criminals evolve by using technology, legitimate financial institutions must respond with innovation," and said the company submitted a 30-page official comment to the Treasury's public hearing on "Innovation in Detecting Illicit Activity Related to Digital Assets."

In the comment, Coinbase pointed out that the Bank Secrecy Act (BSA), enacted in 1970, is "an outdated regulation that increases the burden on financial institutions to collect personal information with negligible actual effect on preventing crime." The company proposed introducing a 'safe harbor' regime tied to regulatory relief, and requested recognition of AI-based transaction monitoring, API-linked surveillance systems, zero-knowledge proofs (ZKP) and decentralized identity (DID) technologies as legitimate means of customer verification.

It also argued that a 'regulatory sandbox' should be established where exchanges and government agencies can experiment with new compliance models, and that regulation should shift from existing reporting-focused rules to an outcome-based approach. Coinbase added that the current BSA system "produces only low-value suspicious activity reports, reducing regulators' efficiency."

The comment was submitted amid Democratic members of the Senate Banking Committee signaling strong regulatory proposals aimed at preventing illicit financing through decentralized finance (DeFi).