EFF has become increasingly concerned that payment processors are being asked to turn over information about their customers, with no mechanism for the public to know who makes those requests, or how often. That’s why we’re calling on Coinbase – one of the largest cryptocurrency exchanges in the country – to begin releasing regular transparency reports that provide insight into how many government requests for information it receives, and how he deals with them. These are difficult decisions with serious consequences, and should not be made in the dark.
Cryptocurrency exchanges should particularly understand the importance of privacy of this information
Financial data can be one of the most sensitive types of information we produce. How you spend your money can reveal a lot about your daily routine, the causes you care about, who you socialize with, and where you go. Choosing to comply with or reject a government request for this user data – or opt to close an account – can have a huge impact on what types of speech can thrive online. Transparency reports are important tools for accountability for companies making these important decisions. Cryptocurrency exchanges should particularly understand the importance of the privacy of this information, as their users tend to reward cryptocurrency cash-like anonymity, and its inherent opposition to censorship. For these reasons, cryptocurrency transactions are often sensitive – and more likely to have an expectation of privacy with them.
At least one of Coinbase’s competitors, Kraken, has already recognized the importance of openness on this subject, and publicly released information on global law enforcement applications it receives. Providing this liability is especially important when it comes to financial data, as they can often be turned over with a subpoena, a 314 (a) application, or a National Security Letter – none of which need to be reviewed by a judge before it send to the financial service provider. And the need for cryptocurrency companies like Coinbase to be open with consumers is only growing, as courts have not sided with consumer privacy regarding these applications.
As we wrote in July, in U v. Gratkowski, the U.S. Court of Appeals for the Fifth Circuit ruled that law enforcement does not need a warrant in order to obtain financial transaction data from cryptocurrency exchanges – in this case, Coinbase was the exchange. In that case, the court relied on third party doctrine. This doctrine states that when people use services such as banks, they lose their reasonable expectation of privacy in the information they pass on to third parties.
The third party doctrine, and the court’s reliance on it Gratkowski, wrong. Storing your data with third parties should not result in users losing any reasonable expectation of privacy. That makes no sense in a world where everyone navigates through their daily lives by relying on services like email that give third parties access to sensitive information.
But we don’t know how many other cases are out there like Gratkowski, which is why we need more transparency from Coinbase. When providing data to the public on how often law enforcement seeks consumer data and services compliance, transparency reports show whether companies are achieving their promises to protect user privacy. They also fulfill an important secondary role by providing details of government surveillance activities.
As one of the largest single companies in the US cryptocurrency market, Coinbase has tremendous power and influence over this dynamic. It should stand up for its consumers and also use its power and influence on the market to demonstrate to others that transparency reporting is an industry standard for all cryptocurrency exchanges. Releasing a transparency report would be one way for Coinbase to demonstrate leadership and fill the gaps in our current knowledge, by shedding much needed light on government requests for information.