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Coinbase Patents AI Compliance System to Monitor and Flag Accounts

Popular U.S. cryptocurrency exchange Coinbase received a patent November 19, for an AI-driven compliance system which would monitor customer accounts, flagging those deemed non-compliant and recategorizing them for corrective action. Described as a “compliance determination and enforcement platform and method,” the new system would monitor a long list of KYC/AML-related details, including “level of due diligence that has been performed on the user account.”

Also Read: US Government Worried Crypto Can Shift Power to Private Sector

Coinbase Granted Patent

The new patent for Coinbase’s “Self-learning compliance determination and enforcement platform” was filed on Sept. 21, 2016 and was granted just over three years later, last week, on Nov. 19. The patent details that “The compliance model core includes a factor entering module, a compliance score model, a comparator, and a flagging unit,” and will review user account details including but not limited to: age, “due diligence,” balance, transaction volumes, geographical location, previous reviews, if and how a user has verified identity, email domain, number of addresses, “number of bitcoin addresses transacted with,” number of bank accounts, IPs, phone numbers, verification attempts, and “the other party in the transaction.”

The patent describes an enforcement mechanism, noting: “the user accounts that fail compliance are flagged to indicate non-compliant accounts … corrective action is executed only for the accounts that are flagged as non-compliant accounts.”

If and when Coinbase intends to implement the newly patented system is unknown. While KYC and AML requirements and enforcement are the norm in mainstream crypto exchange these days, some seemingly arbitrary factors to be calculated by AI, such as “due diligence” are a cause for concern in those questioning the merits of such systems. Not to mention the sheer level of personal and private details to be examined.

Coinbase Patents AI Compliance System to Monitor and Flag Accounts

The Crypto Space Expresses Misgivings About the System

Redditor u/Zinclepto addresses the Coinbase patent in a recent post writing:

KYC measures in this space are extreme and beyond what’s required by law. Where does the line get drawn?

He continues: “At what point do people stand for privacy anymore? These measures take control away from individuals and give them to financial establishments whose goals are self serving. Do people just simply not care about individual liberties anymore? If people do care, why are we collectively being so silent while this occurs?” Another Redditor says “Reported to authorities if the transaction is more than 2k? Wow that can’t be serious,” addressing a focal point in the patent that details:

…the investigator also determines whether the transaction that has resulted in non-compliance is larger than $2000 USD (a predetermined amount). If the transaction is larger than $2000 USD, the investigator … considers filing a report with the relevant authorities.

Other commenters call for permissionless, peer-to-peer trading privately, while still others question the very legality of the proposed practices. “You don’t have to do business with conbase. Find another exchange,” one user replies.

KYC/AML Worldwide

The phenomenon of ever-constricting KYC and AML requirements is not limited to Coinbase, however, and as regulations on crypto are still vague and lack uniformity in many political jurisdictions, exchanges are pressured to adhere to the strictest interpretations of laws possible to legally protect themselves. The inter-governmental Financial Action Task Force (FATF) continues to exercise great influence over the crypto space, since the release of its new guidance in June, and governments have little choice but to begin implementations to adhere to prescribed policies.

What do you think of the new Coinbase patent and KYC/AML regulations? Let us know in the comments section below.

Images courtesy of Shutterstock.

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Graham Smith

Graham Smith is an American expat living in Japan, and the founder of Voluntary Japan—an initiative dedicated to spreading the philosophies of unschooling, individual self-ownership, and economic freedom in the land of the rising sun.

Graham Smith , 2019-11-29 09:43:43 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.

While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

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Nick Chong , 2019-11-10 12:00:38

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