Coinbase has updated its User Agreement to allow the company, either directly or through third party intermediaries, to collect credit histories from its 1.9 million users.

The new terms in the second paragraph read as follows:

“You hereby authorize Coinbase to, directly or through third parties, (i) Make inquiries we consider necessary to verify your identity and/or account information and (ii) request and obtain any consumer report, credit report or similar information relating to you and take action we reasonably deem necessary and to take any action we reasonably deem necessary based on the results of such inquiries and reports…”

Meanwhile in the preceding paragraph, Coinbase had informed its users that if they do not agree with these terms, or any subsequent changes, they will not be allowed to access any Coinbase services and must cancel “free of charge in the manner set forth below.”

Compliance or Commercialism?

Coinbase was recently accused of tracking how its users spend bitcoin purchased on the website. One user´s account was closed after he used his coins to buy cannabis seeds and another was closed because he bought coins on Coinbase and apparently sold them on Localbitcoins. While the use of coins to purchase such seeds could be questionable from a legal standpoint, selling your coins on another website is certainly not.

The California based company defended itself by claiming that these steps were necessary if they wanted to remain in compliance with regulations. Of course, these regulations do require companies to verify identities (Know your Customer) and monitor for possible criminal activity such as drug purchases and money laundering. But do these regulations require a company to pry into a customer’s credit history?

Cointelegraph spoke via telephone today with Coinbase CEO, Brian Armstrong, on the need to verify its customers’ credit history:

“Regulations require us to verify the identity of our customers. We use a number of methods to accomplish this, such as requiring identification and addresses and in many cases rely on third parties for verification. Because some of these third parties include credit history checks as part of their process we changed our user agreement to inform our customers of this possibility so that we could maintain transparency with them.”

Armstrong wanted to make it clear that user privacy was important to Coinbase, but if the company was going to be able to provide customers the ability to move between Bitcoin and their banks, regulations must be complied with fully.

The company does accept verified credit cards and recently began allowing instant use of Bitcoin through its “USD Wallet”, which allows users with a US bank account to do an instant ACH bank transfer.

Coinbase Users Not Happy

Expectedly, Coinbase users are not happy with the new policy. One longtime customer, BitttBurger, said in a recent Reddit post:

“I've been with Coinbase literally since day one. Love their service. Love the site. And I'm the last guy to care about regulations or rules or authority. But I'm not comfortable with them running my credit report. So I guess I have to cancel.

“As a side note, the URL provided to cancel doesn't work. Redirects back to the Agreement. Guess I'm stuck.”

Another user, jimmajamma, made a much more interesting point: Most of us pay little attention to long and rambling Terms of Service and User Agreements. But he also added commented:

“I think using bitcoin is like taking the red pill. You can now see the reality of the situation. Your money, simply a physical manifestation of your labor, is not really yours to save and spend as you please. It's monitored as you make it, as you deposit it and as you spend it. I think that concept is something people need to really do more thinking about. Essentially, you are not free to transact your physical labor. I don't think the state really has that right, but that's also another story going back to 1913.”


The fact is that Coinbase is a business that seeks to work within the legacy economic system, which of course means following the rules. But Coinbase is also an enterprise that wants to take advantage of any profit potential that might become available. Anyone doing business with companies such as Coinbase should understand this and, if privacy is an issue, then it is probably better to find a less intrusive Bitcoin service provider to use as your wallet.

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