Bitcoin Forum

Frankly, Coinbase is turning into a worst kind of fascist dictatorship. Not only is their service completely unreliable (many people report their bitcoin purchases being reversed (https://bitcointalk.org/index.php?topic=654098.0), or their bitcoin withdrawals not going through (https://bitcointalk.org/index.php?topic=652707.0)). Now they have new AML/KYC policies in place which are the opposite of everything bitcoin stands for. And their enforcers have already started profiling their customers using KYC pretext, and refusing services to anyone they don't like.

Here is my story: I've purchased non-negligible amount of BTC via Coinbase lately. Even though I was fully verified with RL data, bank account, phone number, SSN and stuff, their KYC enforcers contacted me to get a full breakdown of who am I, what kind of business I run, where did I get the funds to purchase BTC, the purpose of my withdrawal transactions an so on. And this was not just a formality - they asked me a lot of questions, some of them suggesting that they studied my social network profiles carefully. Like: what is your role in Company A (the only way they could get any idea about my association with Company A is because it was in my social network profile). They literally demanded explanation for every single transaction and statement on the source of every purchase I made. They wanted to know EVERYTHING, and have all the supporting evidence! I mean, what the FUCK? Is this some kind of new Bitcoin Gestapo they are building there. If this is the case, WHY would anyone from this community support this Gestapo?!

What was the explanation for this outrage? Here you go: "Coinbase is a regulated Money Service Business under the FinCEN division of the U.S. Treasury Department and as such, we are required to review accounts to ensure compliance with regulations."

The experience I had with this questioning was, frankly, humiliating and sickening. After giving them a lot of explanations, they were still not satisfied and informed me that they are going to close my Coinbase account. Way to treat your customers who have paid you fat commissions on currency exchange. Comparing this experience with AML/KYC interaction in traditional banking system, I can only say that "Coinbase-style KYC" is so much worse. Banks are more subtle while Coinbase thugs come across as completely unprofessional, rude, capricious and extremely intrusive.

I suggest that anyone holding, or moving non-negligible amount of BTC through Coinbase, consider their Coinbase account exactly as traditional bank account - completely at mercy of an organization that is "holding your money", but working for regulators, not for you. Don't be surprised to be left completely without access to BTC you thought yours in the moment you least expect it. It would be even better to boycott Coinbase entirely - I repeat, the new policies they have in place are the opposite of everything bitcoin stands for.

It's against the BTC mantra to be trusting your coin in an online wallet service that is tied to traditional banking anyway. If you wanted to stay under the radar, you should have played the game. E.g. If you have $50k in cash to deposit in a traditional bank, expect to be grilled and reported if you walked to a teller with that. Instead, make (8) deposits of $6,250 to different branches over a 10 day period, random amounts are better. By that same token, you should be purchasing your BTC from multiple sources, and using different addresses withdrawing it, consolidating it to your offline wallet.

The BTC legal landscape is changing daily. While the FED and IRS are slow to react (and even slower to understand) they are reacting. If Coinbase is to stay in operation, they need to be seen as actively following the regulations of their industry. If they get raided and your BTC is seized, what then? It sounds to me like you were just trying to take advantage of USD/BTC moves and got burned. Sucks for you.  :-\

If I wanted to stay under the radar, I would not be using Coinbase to begin with. I mean, I understand AML/KYC and I had experience explaining source of funds to my banks. However, this experience with Coinbase was definitely much worse than any comparable interaction with regular banks. My point is that "Coinbase style KYC" as it is currently practiced by this company is extremely intrusive to the point of being offensive. Really, me calling them a Gestapo was not even too strong.

And remember, they keep private keys to your BTC - so they can block your access to them at any time and on any pretext. I would advise to be very careful regarding any balances you keep on Coinbase. You also cannot depend on their service in your business strategy as they can close your account on a whim, without giving any valid reasons. Just because they don't like you, or their KYC enforcer likes to play god. Anyone building on top of Coinbase API is wasting their time and shooting themselves in the leg, in my opinion. Long-term, their model is doomed to fail.  

This is seriously bad, has anyone else had a similar experience with Coinbase lately?

I have not bought from coinbase in about a month but from when I used to buy pretty frequently I never had any problems. I still to this day use their wallet to transfer bitcoin in and out at least once daily and I have had no problems.

@gijoes Sorry you had such a bad experience, I hope they are not doing that to a large % of customers.



Thanks for the input.
Maybe someone from Coinbase staff will see this thread and comment?

Don't hold your breath. The users are posting horror stories about their Coinbase experience on a regular basis, and there was not even a single squeak from Coinbase to address them:

https://bitcointalk.org/index.php?topic=654098.0
https://bitcointalk.org/index.php?topic=652707.0
https://bitcointalk.org/index.php?topic=654572.0
https://bitcointalk.org/index.php?topic=651712.0
https://bitcointalk.org/index.php?topic=144673.0
https://bitcointalk.org/index.php?topic=147341.0
https://bitcointalk.org/index.php?topic=145319.0
https://bitcointalk.org/index.php?topic=142409.0
https://bitcointalk.org/index.php?topic=120720.msg1526144#msg1526144
https://bitcointalk.org/index.php?topic=156616.0
https://bitcointalk.org/index.php?topic=155090.0

The list goes on and on, but everybody seems to blissfully ignore all the warning signs... what are people waiting for, another Gox-style blowout?!

I was going to use Coinbase in the future. This list is a good resource, thank you for posting so many links.

You might be fine if you only purchase small amounts of BTC at above-average prices, do not use the service for time-sensitive transactions (as in less-than-a-few-days time-sensitive) and withdraw any bitcoins you managed to purchase immediately. ;)

I had a correspondence (https://bitcointalk.org/index.php?topic=577378.0) with Coinbase recently.  I'm being screwed with by Wells Fargo and I basically just gave Coinbase a heads-up since Wells Fargo forbade me from using Coinbase by name.

Coinbase's response left me with the distinct impression that they would definitely prefer to not rock the boat and would rather stay on the good side of Wells Fargo even if Wells Fargo's business practices impact them negatively.  Right now it's almost certainly not a big enough problem to warrant alienating the big banks over and doing so would likely end up costing them more.  Only a few customers are in my category I would guess.

I have always labored under the assumption that Coinbase will ask 'how high' when the U.S. regulatory system tells them to jump.  It's just good business, and the longer they have a monopoly, the better positioned they will be in their chosen market segment.  Probably 'operation choke point' (http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/05/24/operation-choke-point/) is not impacting Coinbase since it is a reasonable assumption that they would have to comply with the maximum reporting requirements for ALL of their customers already.  So it's already factored in to their revenue models.  Having a monopoly allows them to easily adjust by pricing in whatever they need to.

As a side effect of corresponding with Coinbase, they asked me about how I came to have the Bitcoins I hold.  I answered honestly that I got them from Tradehill-I and invited them to use their technical skills to verify this.  Apparently they did since after a few days they told me to carry on...for now...

It is a complete pipe-dream to think that Coinbase, or any other player with mainstream connections or aspirations, is going to give two shits about the 'spirit of Bitcoin' or whatever...or such as said spirit is perceived in the community on Bitcointalk.org at least.  But mainstream adoption is what we all want, right?  Right?

Don't hold your breath.  When an outfit gets a few attorneys on the team and get smart legally they clam the fuck up.  We are lucky to have had that guy with the Russian sounding name for support on more technical things here for as long as we had him.  Maybe he's still around.  I don't follow things that closely.

Oh ya, 'Olaf'.  Maybe it's Scandinavian and not Russian.  Dunno.

wondering if the "screening" has something to do with nationality/state you are in? like u.s. only etc?

Coinbase only links US bank accounts and in order to verify you need to send them your US SSN and answer a lot of questions to confirm that you are based in the US. I went through this process long time ago and there was no issue with it. I suspect their sudden "due diligence" was more due to me purchasing quite a bit of BTC recently - right around the bottom.

Many people reported previously that Coinbase becomes quite unhappy when people buy cheaply from them. To the point of canceling already confirmed trades. This is understandable - as a trading intermediary, they are only happy when their customers buy high and sell low. It is only natural that they try to eliminate smart alec customers they consider a threat to their casino.

well that explains a lot.. cheers for an info

Greedy companies like Coinbase distroy Bitcoin.

how do you figure? I'm usually all for the muck raking , but this piqued my interest.

I've sold 2000+ BTC with CB, never a hitch. Honestly, I have gotten some deposits a day earlier then projected, but never late. They operate in the US , the US has laws that deal with money, banking and every vertical of the process they service for clients.

Buys maybe fill a little slower, but they need Market Makers.

I personally have never had a problem with selling BTC on coinbase with 10+ transactions.

But if you are having problem perhaps you need to stop using them and find a better avenue to buy/sell bitcoin.

They invested +30m dollars. How do you think they will get it back and with profit, just from transaction fees?

I guess this is worth asking a question

What are the best alternatives to coinbase moving the user-base in reaction to their policies seems like a logical choice.
Mainstream adoption is good and all but for users who want to have more privacy there must be a few good choices to choose from

Anyways another story from the reddit thread.
http://www.reddit.com/r/Bitcoin/comments/1pr4bt/why_i_think_we_shouldnt_promote_coinbase_to_new/

I think your bottom line nails it - Coinbase seeks to be as legitimate as a US bank.  Still, that sounds like an unnecessary level of questioning unless you were doing more than 10K USD worth of transactions in which case they probably have to file a report.

I have also heard of Coinbase "having issues" with trades, especially when the market is moving against them, but the two times I've used them for small transactions, there have been no issues.

I do appreciate hearing that at least they are not requiring verification for their btc wallet services.

Thanks and good luck!

It would seem that, as used, the word 'Fascism' is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox hunting, bullfighting, the 1922 Committee, the 1941 Committee, Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley's broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else.  -George Orwell

In the name of being regulated, CoinBase has become to close to the government, which is against the basic of bitcoin. It is time to look around and find other alternatives.

Perhaps they will do like any bank does with FLOAT and trade on it? If they gained a meager .5% day on holdings, that would grow daily for a long time. They only need to cover the coin as it's needed by customers. Additionally for all we know the function of CB.com is meant to better enable the movements of their mining and other operations ( I do not know if they have this, but it could be ).

Say they touched 10% of FIAT movements per day , and we assume that on average , that would be half of what's mined, and 10% of that. So, 360 BTC / day they "touch" in movement ( which is low, because they service both sides of conversion ),  that would be 10k / day in fee's alone and I'm being very liberal in saying they ONLY make .5% in that transaction.

That would be 300K / mo , 3.6 M / year. Now that's cash flow, so it can get loans against it. If they are betting LONG, thats a 10 year outlook in the worst case. Which to me, is a good sign for the industry. Considering they could easily make 1-2% in "price arbitrage" on any day, you can see this figure balloon nicely.

Realistically I'd imagine they turn around the 30M in about 3-4 years. The good thing about this, they are promoting adoption and user base growth, which could speed that up for them, and make your coin all the more valuable over time.

They are a payment gateway and an exchange baked into one, so they have a lot more going for them than others.

Gotta look long if you want BTC to be long. I much prefer to see investments publicly than privately. Good signals for other investors in the other verticals.

/endrant

Although with a monopoly they likely could be profitable on transaction fees, that is probably not the goal or strategy.  It's a happy accident of fate which won't likely last.  A very common strategy model for startups these days is to simply make something which larger companies will want then work on being acquired.  A sensitive market segment such as that in which Coinbase operates is especially suited for this.  It is a win/win for both the mega-corp who doesn't have to expose themselves to the variety of risks involved, and the start-up who doesn't have to worry excessively about how they are going to scale, attain profitability, fund lobbyists, and so on.  Indeed, it's sometimes a benefit to the consumer who can realize a subsidization of a valuable service...for a while...

Hopefully we'll see Circle enter the mix pretty soon and a bunch more follow.  One for each of the handful of meaningful financial sector mega-corporations.

Although more Coinbases will mean more competition, my more immediate concern is that I'm being forced into a very unwelcome game of cat-n-mouse in order to try to complete my speculation on Bitcoin as mainstream banks cancel my accounts.  Wells Fargo forbid me from Coinbase by name, but they didn't forbid 'Circle'.  So, I'll happily fire up a new account and attach it to Circle and play similar games until they run me (and my rather large demand account deposits) off completely.  I can probably play that game until the Feds get involved and banish me as an individual from the entire banking system.  At that point I'll have to try to operate overseas I guess.  What a fuckin hassle.  The ironic thing is that I have a strong desire to pay my taxes and even accomplishing that is now tricky due to interference brought on almost certainly by Federal level market interference of one nature or another.

After reading your posts about  your banking issue, to me it sounds like you have sold a lot coin for a lot of money in the past few months. (im thinking in the hundreds of thousands range, at least) The reason I think that is that you have or had a personal banker which you only get if you transfer a large sum over period of time. You have to remember that the Govt is focusing on illicit vendors that use bitcoin. You probably raised flags since you probably fit that mold. Im not saying you are by any means, I would find another bank, or a couple of banks and not transfer so much money. I would keep it to under 25k a month.  But when you transfer  tens of thousands or hundreds of thousands and its all from bitcoin, of course they are going to assume that you are getting them illegally. Thats why coinbase is now asking where you got your coin.

The guys that were on the silk road case have now formed a KYC organization and all they do is go thru all bitcoin exchanges and look at everyones personal info and when they see a red flag, you will be investigated. I learned this from looking at a linkedin profile of one of the head guys at the DEA that brought down silk road and he actually put that in his profile, lol... So, anyone that is going to be withdrawing a substantial amount of money with bitcoin is going to get looked at. Especially a USA based company that wants to stay compliant.

You are almost certainly correct in all of your estimates outlined above.

I do hope that at some point it will be more possible to stretch Bitcoin operations out as months-long tactical plays, but at the present time and for the near future Bitcoin is far to volatile.

I understand and indeed welcome financial institutions looking for criminal activity an attempts to criminally exploit their offerings.  Ideally I WOULD be flagged and investigated.  If any questions remain outstanding, all they would have to do is contact me and I would explain the details and provide documentation which could be cross-checked against other data that the various entities have (which is probably a lot.)  Then I would be told to carry on, or normally I would never have been bothered in the first place.  Coinbase seems to have performed in this manner and I appreciate it.

In actuality what happened in mainstream-land is that I was very significantly impacted on the the basis of suspicion alone and with no opportunity to supply input.  This might be more 'efficient' (e.g., add to Wells Fargo's next few quarterly earnings and bonuses for their execs), but it's not a maintainable method of fostering and enduring economy.  If legitimate players are forced out of the system it does nobody any good (except that it might spur development of crypto-currency alternatives which, I must admit, I very much welcome.)

I believe that when there is credit card and other fraud, the banks just distribute the cost of the fraud to their non-fraudulent userbase and make little or no attempt to hold the perps accountable.  They probably do send a note to law enforcement, but it usually goes into the round file for 'efficiency' reasons.  Again, this is a form of corrosion of our financial systems (and political systems) and the effects will increasingly felt (higher fees, etc) but more threateningly will form a weakened structure which is prone to play a role in a more systemic collapse.

It's hard to imagine worse advice than what you give here, which is illegal and subjects the victim of your advice to huge fines as well as potential jail time.

Will you be visiting the victims of your advice in jail? Or donating to their legal bills and substantial financial penalties?

Wise words.

For my part I very deliberately routed things through one account and went out of my way to make sure I did some transactions exceeding $10k.  This was very much so I could not be accused of 'structuring' for the purposes of avoiding detection or whatever.

Any 'structuring' (deliberate or not) is likely to be trivially detected at this point such is the nature of the surveillance state.  This is particularly the case in the financial arena.  These are, of course, only my guesses, but they are vaguely educated guesses on my part.  So, primitive attempts at gaming are relatively pointless and usually counterproductive.  Long term poster 'proudhon' made a statement recently which I liked: "Don't try to beat them at their own game."

Now, for my troubles on being fully transparent I did have my accounts canceled.  But I am not in jail!  Not yet anyway, and I don't expect to be unless the simple act of making some money off Bitcoin is criminalized...and ex-post facto principles which are pretty basic in any semi-functional legal system are shit-canned.

 - edit: correction.

Not discussing practical aspects, but in essence dictating someone how to deal with his/her money has a definite taste of totalitarianism. Come to think about it, Jeff Tucker is right when he mockingly calls money laundering "a thoughtcrime".

http://bitcoinism.liberty.me/2014/07/08/re-enhanced-due-diligence/

Ya, so what?  Seems pretty reasonable and rational on the part of Coinbase IMHO.  They did the same thing to me more or less.  Obviously I don't like it a lot, but it makes perfect sense.  Coinbase is in business to make money, and you don't stay in business very long by telling the authorities to stick it up their ass.  Even an outfit of Google's size can get only so far by attempting to do so, and trying it as a start-up is a sure-fire way to make some angle investors very unhappy.

It is the case that Coinbase retains a monopoly in their market space (as best I can ascertain...Circle has not yet replied to my request to be a customer...)  It is reasonable to infer that Coinbase is particularly compliant with the regulators.  Again, that would not be shocking to me and I'm pretty neutral about it to say the truth.  Helps, I suppose, to be not especially threatened by it personally.  I'm pleasantly surprised that simply telling Coinbase to talk to Kenna about my BTC (via analysis of the blockchain) was sufficient to get them off my case.

I don't particularly care whether or not I have a Coinbase account - my need to convert a USD income into bitcoin has run its course.

The next generation of new Coinbase users, on the other hand, deserve to know what they are getting into so they won't be able to claim they weren't warned when the inevitable Goxxing happens.