Cryptocurrency exchanges are one of the big pillars of the crypto industry as they are the means by which most people are able to buy and sell cryptocurrency and a vital part of the industry being able to function on a day-to-day basis. Exchanges, however, have faced a number of challenges over the years such as being susceptible to hacks and the constantly changing cryptocurrency regulations they have to adapt to in order to remain in the good books of the law. An example of this is the requirements that are being set up for cryptocurrency users which exchanges have to enforce on their end to an extent.
Coinbase seems to be taking a step ahead as they recently filed for a patent that will automatically identify and flag all accounts on their platforms that are not compliant.
In the Age of Compliance
This information comes courtesy of a filing with the United States Patent and Trademark Office from November 19, 2019 which details the scoring system which compares each individual account on the Coinbase platform and gives them a certain score based on compliance and by comparing scores across the platform, is able to detect those are failing terms of compliance.
According to the filing, the system not only determines non-compliant accounts but also determines whether they are good or bad and then enters this feedback into the system and determines whether or not the account should be closed automatically.
“An investigator may be able to determine whether an account is being used for illicit activities by doing research on the parties of the transaction who receive or send payment and determining whether such parties are regularly involved in illicit activities. It may for example be relatively easy to determine that a party sending or receiving payment is in the business of conducting online services that may be illegal,” the filling says.
It should also be noted that exchanges’ level of compliance with the requirements from law enforcement is also under scrutiny as a report recently unveiled an analysis of 122 exchanges to determine how substantial their know-your-customer requirements and anti-money laundering measures are.