Coinbase used to be great. You signed up with an email address, bought bitcoins with dollars, or sold bitcoins for dollars. It was pretty simple. I recommended their service to literally every person who ever asked me how to buy Bitcoin.
Now almost two years later, I've contacted the people I sent Coinbase's way and advised them that due to the company's recent (and extensive) violations of the ethics of the crypto world, I'd recommend ending any relationship with them.
Here are the top five reasons why:
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Coinbase spies on their users' expenditures. News that Coinbase was tracking what their users did with their bitcoins after they bought and withdrew them came when gamblers reported their Coinbase accounts were being closed.
Coinbase sent messages to the users whose accounts had been closed, including this paragraph:
“In the event that your controls change and you are able to prevent such activity from occurring on your platform please let us know and we’d be happy to review your compliance program and evaluate your account to see if we can support it in the future.”
Compliance program? What if your local grocer demanded you complete a compliance program to buy carrots? Or your gardener demanded such to get your hedges trimmed?
It is clear that doing good business – that is, simply giving the customer what he wants – is not at the heart of Coinbase's business model. They instead demand that the customer give them what they want.
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Coinbase employs former bureaucrats from the likes of “Homeland Security.” Bitcoin has been heralded since its founding as the tool that would finally allow people to cut the ties binding them to elitists like politicians and bankers.
But Coinbase wants to keep – and strengthen – these ties of the past.
In fact, they have an entire swath of employees staffing what they call their “government affairs department.” Among them is John Collins, a former advisor in the “US Senate Committee on Homeland Security and Governmental Affairs.”
If the words “Homeland Security” strike terror into your heart, that's because you're paying attention. The words have been used to wreak all sorts of atrocities in America, such as highway checkpoints (detention points), “TSA” airport screenings (gropings and naked body scans), neighbor-on-neighbor spy campaigns (“If You See Something, Say Something”), and other untold acts of terror.
And Coinbase now calls someone recently active in these atrocities one of their own.
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Coinbase terminates accounts of people who make trades they don't personally like. Think of all the things you don't personally like. Perhaps spaghetti. Perhaps ballet. Maybe you don't like water polo.
The administrators at Coinbase, for their own personal reasons, don't like that people use drugs, and they don't like when people buy and sell things without permission. For this reason, they've reportedly shut down the account of a user they claimed used bitcoins to purchase cannabis, and another user who sold bitcoins to others via LocalBitcoins.
God help us if other peoples' personal preferences dictate what we can and cannot buy.
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Coinbase is actively acquiring and storing users' credit histories in a database. If you didn't read one of Coinbase's more recent “terms of service” updates, you may have missed it entirely: overnight, Coinbase decided that buying and selling bitcoins wasn't sufficient. They now track and store users' personal credit histories, as well.
Coinbase CEO, Brian Armstrong, explained the move to Cointelegraph in early January:
“Regulations require us to verify the identity of our customers. We use a number of methods to accomplish this, such as requiring identification and addresses and in many cases rely on third parties for verification. Because some of these third parties include credit history checks as part of their process we changed our user agreement to inform our customers of this possibility so that we could maintain transparency with them.”
One can only ask, what does this have to do with their business? Coinbase doesn't make loans. Maybe having your credit history accessed by strangers isn't a problem for you. But then that leads to the question – if Coinbase wants its users' credit histories so badly, why didn't they just ask for them? Why is the program not opt-in?
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Coinbase's new exchange is entirely political (and hence off-limits to almost everyone in the world). The majority of online Bitcoin exchanges are global – you can use them from anywhere and trade with people from anywhere. It's great, and it gives access to the best trades, too.
But Coinbase decided that consumer demand is not nearly as important as courting political bed fellows when they decided to “license” their recent exchange. As a recent and highly-upvoted cartoon on the Bitcoin subreddit reads, “Licensing is when the government takes away your right to do something, and then sells it back to you.”
This political maneuvering means that the Coinbase Exchange is only available to about 2.5% of the world's population, or 24 states in the U.S. Even if the exchange were to magically become accessible to all interested customers, do you really want to do business with a company that serves politicians before consumers?
It's – Thankfully – Still Your Choice
Even after reading all the damning evidence, you may still decide that you'd like to continue to do business with Coinbase. Great. That's your choice.
Do be wary, however, of the pattern that is forming through their actions. Whereas now you still have the choice to use an unlicensed online exchange, do you have the option to use an unlicensed bank?
No, you don't, because banking was completely taken over by the regulatory state a long time ago.
Players like Coinbase would see cryptocurrency go the same way.
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