The Electronic Frontier Foundation or EFF is reaching Coinbase due to a lack of transparency. At the same time, the group pointed to its Coinbase Exchange competitor, Kraken, as an example of responsible behavior. The EFF was established in 1990 with the goal of promoting civil liberties on the Internet. In today’s post, the EFF said they have a growing concern that payment systems will be forced to transfer user information to law enforcement, while the public has no mechanisms in place to verify these requests:
“This is why we are urging Coinbase – one of the largest cryptocurrency exchanges in the country – to start issuing regular transparency reports that give an indication of how many government requests for information it receives and how it is dealing with it.
It indicates that financial data is one of the most sensitive personal information. They say the way in which exchanges choose to meet government requests for such data can have a huge impact on users, noting that cryptocurrencies value privacy in particular:
“The cryptocurrency exchange should be particularly aware of the importance of confidentiality of this information, as its users tend to appreciate both the anonymity of cryptocurrency and its inherent resistance to censorship.”
The article also cites competitor Coinbase Kraken as an example of responsible behavior:
“Kraken, at least one of Coinbase’s competitors, has recognized the importance of being open about this issue and has publicized the [global] police requests it is receiving.”
The report states that courts apply the so-called “third-party principle” that allows law enforcement agencies to receive a person’s financial data from brokers as crypto exchanges without security. A person should expect to lose some of their privacy if they choose to store data with a third party. This was stated in the US v. Gratovsky, US Court of Appeals for the Fifth Circuit, in which Coinbase was also involved.
Encouraged EFF Coinbase to harness its power and reputation in the cryptocurrency industry to protect users and set an example for other exchanges.