tl;dr
Coinbase has urged US lawmakers to update the Bank Secrecy Act by incorporating Zero-Knowledge Proofs (ZKPs) to enhance financial transparency while protecting consumer privacy. Coinbase's Chief Legal Officer Paul Grewal highlighted that current KYC processes have security risks due to centralized d...
Coinbase has called on US lawmakers to update the Bank Secrecy Act (BSA) by integrating Zero-Knowledge Proofs (ZKPs) into the financial compliance framework. In a statement dated August 4, Coinbase’s Chief Legal Officer Paul Grewal highlighted that ZKPs can boost financial transparency while safeguarding consumer privacy. He noted the current Know-Your-Customer (KYC) process, required by the BSA, presents security vulnerabilities due to centralized databases often targeted by cybercriminals. Grewal emphasized that much of the collected data remains unused yet is still attractive to hackers.
Zero-Knowledge Proofs offer a way for individuals to verify specific credentials, such as identity or age, without revealing the underlying personal data. Grewal illustrated that customers could open accounts using ZKPs to prove they are not on sanctions lists or minors, without sharing detailed personal histories. Moreover, law enforcement could obtain detailed information only through subpoenas directed at the entity issuing the ZKP. The use of ZKPs could also overhaul information sharing between financial institutions and government agencies by automating compliance data transfers and minimizing sensitive data exposure. This approach aims to reduce excessive data collection, which currently compromises privacy for millions of law-abiding citizens in efforts to track a few offenders.
Coinbase’s promotion of ZKP technology aligns with a recent dip in its stock price, perceived by market analysts as a buying opportunity. Senior Research Analyst Mark Palmer from Benchmark attributed the decline to short-term traders reacting to weaker second-quarter results. However, Palmer views this as an opportune moment for investors with a long-term perspective. He cited Coinbase’s strategic partnerships, such as with Circle to leverage USD Coin (USDC), its expanding prime brokerage services, and its growing footprint in institutional crypto markets as strong growth drivers.
Additionally, Coinbase is developing a “super app” that integrates trading, payments, decentralized finance (DeFi), non-fungible tokens (NFTs), and more, potentially creating a unique U.S. market offering. The platform’s integration of decentralized exchanges (DEXs) further broadens token trading options for users. These developments position Coinbase for sustained growth and wider crypto adoption. Reflecting these prospects, Palmer reiterated a “Buy” rating on Coinbase’s stock, setting a target price of $421.