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Tl;dr: At Coinbase our mission is to increase economic freedom in the world, and we do so by trying to be the most trusted company in crypto.

At Coinbase, we’re working hard to help update the financial system by building trusted products that expand the utility and adoption of crypto because we believe crypto and blockchain technology have the ability to increase economic freedom and opportunity around the world. Coinbase chose to become a public company in the US because we believe the US would best be served by embracing this fundamental innovation. While it is unfortunate that the US has chosen to pursue a path of regulation by enforcement when many international markets are moving forward with strategies to become “crypto hubs,” we believe it can turn around this disappointing trend for crypto development.

The US has, for example, been a thought leader in the fight against financial crime, and has implemented sensible regulations that have improved the safety of consumers. One such area where the US has led and we believe compliance is critical is Know Your Customer (KYC), which is why we believe it's important to explain the KYC lifecycle in order to fulfill our commitment to user trust and transparency.

While many believe KYC is simply a one-time event enabling a user to onboard onto our ecosystem, it is actually a lifecycle. As a user, you may expect to share your personal information with companies once, and we understand that it can be frustrating to have to present identification information (such as a driver’s license or personal information) multiple times. With our user-first mindset, this poses a key challenge to design the optimal experience, while adhering to regulations and creating a secure ecosystem. That’s why we think it's important to explain the process and demonstrate how the KYC lifecycle helps prevent fraud, money laundering, and other illegal activities within the crypto industry.

Elements of the KYC Lifecycle

Identity Verification (IDV)

• Why is it needed? Identity Verification is a key step where we verify that the person who is signing up is really you and not an imposter. While we’d prefer to default to trust, we have a responsibility to protect our users and the crypto community from bad actors who steal identities or otherwise try to impersonate good people.

• What this means for you: IDV starts when you securely send us images of your government issued identification card (ID). Coinbase’s IDV platform is designed to reject fraudulent documents and only pass IDs that have been rigorously reviewed with over 200 checks between us and our trusted partners.

Customer Due Diligence (CDD)

• Why is it needed? During onboarding, users are required to share their basic information and the intent behind opening an account. This allows us to assess risk by developing a better understanding of our users and what type of account activity we might expect, which bolsters the security of our platform for the entire crypto community.

• What this means for you: During the process of opening an account, you’ll be prompted to provide information such as address, occupation, how you’ll be funding your account and the type of activities you plan to conduct. As you access additional products or services, you may be asked some additional questions to help us manage incremental risk.

Enhanced Due Diligence (EDD)

• Why is it needed? On occasion, certain risk factors are identified during onboarding or through ongoing monitoring which may require you to go through a secondary due diligence process. This level of diligence enables us to mitigate risks and ensure uninterrupted access to all of our products.

• What this means for you: When needed, we may reach out to you to collect some additional information, such as proof of address (e.g., a utility bill), source of wealth information (e.g., employment verification), or other relevant information.

Ongoing Monitoring

• Why is it needed? Coinbase continuously monitors for risks related to things like fraud, sanctions, and other potentially suspicious activity to stay ahead of bad actors. The ongoing nature of this monitoring helps us assess risks regularly, which is key to keeping our users safe and overall increasing adoption in crypto.

• What this means for you: Mostly nothing; we try to do this work behind the scenes internally before reaching out. But when we don’t have all of the information we need to understand a potential risk, we may get in touch for additional information. On rare occasions, we may also proactively restrict activity on your account while we investigate to help keep your assets safe.

KYC Refresh

• Why is it needed? Coinbase prompts users to periodically verify and update their KYC information. This practice enables Coinbase to have a high degree of confidence in the validity of its users’ personal information and to maintain high accuracy of our risk-based assessment.

• What this means for you: Based on the age of your account and when you last updated your information, you may be prompted at login to confirm or update the information we have on file or to answer a few questions.

Periodic Review

• Why is it needed? In addition to ongoing monitoring, we also conduct periodic evaluations of accounts to determine if a user’s activity is in line with their expected activity. This practice includes a review of KYC information and accuracy of a user's risk profile to help ensure that the account is not being misused.

• What this means for you: Mostly nothing; should our review raise questions that we cannot resolve on our own, we will reach out for any required information to ensure uninterrupted access to our product and services.

Bringing it all together

Our KYC program is a crucial element of our financial crime compliance function, which verifies users' identities and assesses the risks they pose to the platform. Although KYC involves a myriad of steps that may at times feel frustrating, it is absolutely critical to building a secure ecosystem that adheres to regulations and fosters user trust. You, as a user, play a critical role in this ecosystem by providing required personal information periodically, enabling Coinbase to remain the most trusted platform in the industry.

Looking ahead, the future of crypto KYC is likely to involve greater automation and standardization of processes, while adhering to regulatory changes in the industry. Additionally, development of decentralized identity solutions will pave a path to a more technology and privacy forward experience to keeping the required personal information up-to-date within the KYC lifecycle. The financial system is undergoing changes with the expansion of crypto products and blockchain technology, and Coinbase is committed to building trusted and compliant products that promote economic freedom and opportunity worldwide.