Coinbase Secures New Patent For An Account Identification System

The latest Coinbase news show that the major American cryptocurrency exchange is taking multiple swings at new patents. This time, Coinbase secures a new patent for a system which works to identify and flag non-compliant accounts.

As a filing with the United States Patent and Trademark Office on November 19 shows, the system contains a scoring model that “determines a compliance score for each one of the accounts based on the respective factors associated with the respective account.” As such, the system then compares the compliance score for each account to detect those accounts that fail the compliance standards.

Now that Coinbase secures a new patent, we can see that the system works to assess whether the purportedly non-compliant accounts are good or bad. Their classification is entered into a feedback system and the system decides whether or not to close the account.

“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 filing shows.

As Coinbase secures a new patent, we can see that exchanges are making bigger and bigger moves towards adoption of systems that work against illicit activities.

Speaking of, CipherTrace reports for the third quarter of 2019 show that the total volume of cryptocurrency related fraud and theft resulted in losses which are worth $4.4 billion in 2019. CipherTrace also showed the 120 most popular exchanges and their Know Your Customer (KYC) and Anti-Money Laundering requirements and analyzed patterns in these crypto-related crimes.

In contrast to this, we can see that earlier in November this year, the lawyer and general counsel at the decentralized startup Compound Finance, Jake Chervinsky, asked whether exposing the public to data risks that KYC requirements carry with them is actually worth it. He argued and said that KYC helps law enforcement to track illegal transactions but also exposes the public to hacking, identity theft and phishing.