Coinbase is monitoring the purchases its users are making through their bitcoin accounts and is shutting down the accounts involved in transactions with suspicious websites.
Earlier, Coinbase began banning the accounts that have been used to send the digital currency to the gambling websites, including Seals with Clubs and Satoshi Dice, even though online gambling is legal today.
The move, which was taken in order to comply with anti-money laundering regulations, raised concerns that the company is tracking all the purchases made by the users even after the money has been withdrawn from their bitcoin wallets.
“I have been a long time coinbase customer, buying 1-3 times per month, I got an e-mail today saying they are banning me from using their services because of a ToS violation. I e-mailed them back to ask what the violations [were] and they told me that they have evidence that I used some of the BTC I bought for cannabis/cannabis seeds. They gave me a specific BTC transaction and said it was for drugs and wouldn’t listen to anything I had to say,” wrote Reddit user ‘White1ce’.
In fact, the problem is that the regulation, which is negatively accepted by the bitcoin users, is not aimed at protecting the consumers. It is, instead, is designed to improve control over the consumers’ expenditures for the benefit of the financial industry.
The account of another Coinbase user was banned after he allegedly sold bitcoins, bought on Coinbase, to LocalBitcoins. The user stated: “Because I buy a few bitcoins a week from Coinbase (although sometimes I will go months without buying any) I was flagged as having enough volume to potentially be a Money Services Business (MSB) and the Coinbase ‘compliance team’ mounted an investigation against me. They determined that ‘they have reason to believe’ I am selling Bitcoins on LocalBitcoins, even though they haven’t said what that reason is, and therefore are suspending my account.”
According to Coinbase, the company’s decision was taken in order to stay in accordance with the drug laws and federal anti-money laundering regulations. Still, it seems like the company went too far with its regulation, as it is not only monitoring the purchases made via the service, but is also tracing the users’ spending after they withdraw the coins from their wallets.