Crypto execs on X are calling for know-your-customer (KYC) protocols to be scrapped after main US trade Coinbase disclosed that its workers had accepted bribes and leaked customers’ private knowledge.
The leak, shared by Coinbase on Thursday and documented in a Ok-8 submitting, revealed how abroad help workers have been corrupted by dangerous actors into stealing info, together with residence addresses, authorities IDs, and checking account particulars.
This knowledge was then leaked to people to be used in social engineering scams designed to steal person funds, which can value Coinbase between $180 million and $400 million in reimbursements.
So as to add to Coinbase’s troubles, the Securities and Alternate Fee is now reportedly investigating whether or not the agency exaggerated its person numbers.
In response to the leak, the CEO of crypto analytics agency Nansen, Alex Svanevik, known as for Donald Trump to “dismantle” the KYC and anti-money-laundering (AML) “complex.”
Coinbase simply proved once more why centralized knowledge honeypots are a catastrophe ready to occur. KYC means handing over your id to be leaked, bought, or extorted.
The mixture of information uncovered right here (actual life addresses, crypto addresses and quantity and actual life id paperwork) is… pic.twitter.com/ZeOwpChZxO
— Lefteris Karapetsas (@LefterisJP) Might 15, 2025
KYC checks contain verifying a person’s id by way of numerous items of documentation. This could embody authorities IDs, passports, and utility payments.
Nonetheless, Svanevik says, “All [KYC] does is compromise personal data for regular people — at an immense cost.” He additionally claims that “practically no real criminals are caught.”
Coinbase leak places KYC within the limelight
Svanevik is one in every of a lot of high-profile crypto proponents criticizing KYC measures. Certainly, Wintermute CEO Evgeny Gaevoy mentioned that Coinbase not disclosing the leak sooner is “the dark side of the idiotic and nonsensical KYC/AML regime we live in.”
Bitcoin pockets agency Nunchuk_io, in the meantime, responded by calling KYC a catastrophe that “can happen to anyone.”
Nick Neuman, the CEO of pockets agency Casa, mentioned, “This is why we don’t collect KYC by default.” He added, “It’s one more attack vector for people to use against you.”
Crypto sleuth ZachXBT has additionally criticized KYC protections prior to now, and highlighted how criminals are in a position to purchase accounts fitted with verified KYC credentials to be able to bypass checks.
In 2023, Europol shuttered a legal market that bought the KYC credentials of over 2 million folks.
Some, nevertheless, like Gaevoy, imagine KYC can nonetheless exist within the type of zero-knowledge proofs, a crypto-based know-how that permits info to be verified with out revealing the precise info enclosed.
