U.S. digital currency exchange Coinbase said it received more than 1,800 subpoenas for user information from law enforcement in the first half of 2020, an indication that governments are still wary of digital currencies despite increasing popularity.
The San Francisco-based crypto exchange said it received 1,914 requests in the first six months of the year from global government agencies seeking customer account information and financial records in connection with civil, criminal or other investigative matters.
Of that amount, 1,848 were classified as criminal and 66 were classified as civil or administrative, Paul Grewal, chief legal officer at Coinbase, said in a blog post published Friday.
Coinbase serves more than 38 million customers around the world, but the vast majority of requests, 1,113, came from the U.S. The company also received 441 subpoenas in the U.K., 176 in Germany and 45 in France.
Friday's disclosures from Coinbase came after digital rights advocacy group Electronic Frontier Foundation called on the crypto exchange in September to issue transparency reports. The foundation said it was "past time" that Coinbase be more upfront about government requests and how it protects user data.
Coinbase said it wants to be "the most trusted venue for anyone to interact with the cryptoeconomy," and chose to share the stats in its first transparency report in the interest of protecting the financial privacy of its customers.
"As a financial institution with a duty to detect and prevent prohibited activity on its platform, we respect the legitimate interests of government authorities in pursuing bad actors who abuse others and our platform," Grewal said.
"Yet we will not hesitate to push back where appropriate, even when it is inconvenient or costly to do so."
Grewal stressed that each request that Coinbase receives is handled by the company's team of "experienced specialists" to confirm the validity of the request or object to ones that are overly broad.
However, Coinbase did not disclose how many of the received requests were valid, rejected, fulfilled or still ongoing. It represents a step forward in transparency in crypto, with room still for improvement.
"While we are restricted from disclosing some of the information requests we receive, over time we hope to update and improve our reports with additional information, resources and observations to provide more granular insights into our government response process," Grewal said.
Out of all the subpoenas Coinbase received in the U.S., 16% came from state or local authorities and 30.5% came from the FBI. The cryptocurrency industry has been dealing with skepticism from government agencies for years, and a recent survey from several research firms confirmed that many still fear criminal use of the digital coin.
Between 75% and 84% of respondents said they were concerned that cryptocurrencies would be used for criminal activities like money laundering, procuring illicit goods and services and circumventing sanctions. And 55% said cryptocurrencies were more of a risk and than an opportunity.
Earlier this month, the Bank of Canada said that central bank digital currencies can be risky assets for users despite attracting a surge of interest throughout the world, and that they could be as vulnerable to hacking as other cryptocurrencies
Many countries, including Canada, have been considering launching a centralized digital currency. Central bank digital currencies differ from cryptocurrencies like Bitcoin because they would have the status of legal tender, making them appear safer to some would-be holders.
Founded in 2012, Coinbase brokers exchanges of cryptocurrencies like Bitcoin, Ethereum, Litecoin and more. It plans to continue releasing similar transparency reports on a regular basis.
"While transparency reports have become more common in tech, they remain rare in financial services," Grewal said. "We think it is important not just for cryptocurrency companies, but for fintechs and banks at large to shed light on financial data sharing practices and contribute to the understanding of industry trends in a meaningful way."
--Additional reporting by Zack Fishman and Owen Poindexter