Skip to content

Base & Liberty Reserve: More Similar Than You Think

Coinbase launched its own Ethereum Layer-2 network "Base" and it raises a number of interesting questions.

Coinbase has stated, publicly and repeatedly, that Base will begin operations under their control and accept permissionless deposits from Ethereum's mainnet.

In some sense Coinbase is operating an anonymous payment network which feels potentially problematic. And the overall setup resembles aspects of the Liberty Reserve money laundering service who's founder is not quite half-way through a 20 year prison sentence.

So here we are going to dig in to base in some detail. First we need to establish, based entirely on public statements, that Coinbase is operating an anonymous payment network while simultaneously holding dozens of money transmitter licenses. Then we are going to look at precisely what Liberty Reserve was charged with to explore some similarities and some differences. Finally we are going to return to Coinbase's licensing requirements and consider if they can possibly do what is asked of them.

The goal here is not to attack Base, or Coinbase, or to suggest US money transmitter rules are perfect. Rather it is to ask: if a registered money transmitter can legally set up a centralized anonymous permissionless payment network what is the point of KYC/AML?

Laws which can be trivially avoided are useless and should either be repealed or have their loopholes closed.

This post is for subscribers only

Subscribe

Already have an account? Sign In

Latest

CertiK: White Hat or Black Sheep?

CertiK: White Hat or Black Sheep?

The security firm faces accusations of extortion after exploiting a vulnerability in Kraken, a major cryptocurrency exchange. CertiK allegedly demanded a ransom for the return of stolen funds instead of following responsible disclosure procedures.