- Coinbase experienced another outage last week after Bitcoin’s $10,000 surge
- Allegations emerged of the exchange selling users information to the IRS and DEA
- Author Nassim Nicholas Taleb publicly deleted his account after poor customer service
Coinbase was once the top exchange in the cryptocurrency space, but several events in recent years have seen it slip down the pecking order, and last week crystallized the issues facing the platform. Another outage as Bitcoin hit $10,000, revelations that they are selling customer information to US authorities, and the announcement by a public figure that he was closing his account over poor customer service has left CEO Brian Armstrong with a mountain of bad PR to climb.
Coinbase Goes Down Again
Coinbase’s bad week started when it was forced to apologise for yet another outage on June 1 that left customers unable to trade during Bitcoin’s sharp rise from $9,500 to $10,400. This is far from the first time that Coinbase has experienced outages during times of high volatility, which is all the more galling since the exchange recently put up its fees, which are now among the highest in the industry.
Given that the volume levels being experienced by exchanges are not exactly record-breaking right now, to regularly have outages on $1,000 moves does not bode well when it comes to a full blown bull run. Coinbase blamed the outage on a “5x traffic spike over 4 minutes” as Bitcoin hit $10,000, which their systems could not cope with. While this may sound plausible, Coinbase has had almost eight years to understand just what Bitcoin can do, and so to have systems that regularly cannot cope while putting up customer fees at the same time is not a good look.
User Information Sold to U.S. Authorities?
Coinbase also drew ire this week after it was claimed that that it is “is in the process of selling blockchain analysis services to the IRS and DEA”:
SCOOP: Based on public records, it appears that Coinbase is in the process of selling blockchain analysis services to the IRS and DEA – a year after acquiring Neutrino led by former leaders of an Italian spyware vendor Hacking Team.https://t.co/J93g90Icad pic.twitter.com/6AnlUmZqWt
— Larry Cermak (@lawmaster) June 5, 2020
This is bad enough in itself, but it draws an interesting parallel with what happened in February 2019 when Coinbase acquired a blockchain startup called Neutrino. At the time they stated that they hoped Neutrino would help “ensure compliance with local laws and regulations”. However, concerns were soon raised about the backgrounds of the Neutrino team and in particular CEO Giancarlo Rosse who, in a previous role, was involved in the creation and sale of spyware to purported human rights infringing actors.
In trying to deal with the fallout of this, which resulted in the Neutrino team being “transitioned” out of the project, Coinbase Head of Sales Christine Sandler admitted that they had sought to bring compliance in-house because past compliance software suppliers had been “selling client data to outside sources”. A short-lived #deletecoinbase movement sprung up which the exchange survived, but given that they are now seemingly selling user information to the IRS and the DEA after accusing their previous suppliers of doing just the same could see it spring up again.
Taleb Swans Off
One well known Coinbase user who has already decided to #deletecoinbase is Black Swan author and cryptocurrency enthusiast Nassim Nicholas Taleb, who, fed up with Coinbase’s rubbish customer support, publicly announced on Thursday that he was closing his account:
— Nassim Nicholas Taleb (@nntaleb) June 4, 2020
Coinbase will be hoping for a much quieter week this week, although with Bitcoin looking like it is going to experience huge volatility within the next 3-4 days, that isn’t very likely.