Chainalysis Refutes Claims of Leaking User Data

The blame game between Chainalysis and Coinbase over sharing users’ personal data took another turn when Chainalysis, a blockchain analytics firm founded in 2014, released a statement in which they denied the allegations made by Coinbase.

In the official statement, Chainalysis stated that blockchains record transaction details such as time of a transaction, the amount transferred and the account to which it is transferred. Besides, Chainalysis said that the context of the transaction is also recorded because of anti-money laundering (AML) regulations. In simpler words, blockchains require the details of services used by customers to send and receive cryptocurrency. While stating that the collection of data is a regulatory requirement, Chainalysis explained that what they do is just put transaction data in context for their customers. Despite the allegations leveled, Chainalysis gave a briefing about their policy and general practices but never explicitly said anything related to not selling user data at any instant in the past.

Earlier in March, an executive of crypto exchange platform Coinbase had claimed that third-party analytics providers were selling user data illegally. In an interview with Cheddar, Christine Sandler, Director for Institutional Sales for Coinbase, claimed that the exchange had to acquire a blockchain intelligence firm, as they found former data providers selling user data to third parties.

Coinbase itself was under immense pressure from the crypto community who believed that Coinbase was selling user data. The community responded and started a hashtag #DeleteCoinbase. This being a problem for Coinbase, they chose to do away the associations not good for the company’s image. The first attempt to clarify people’s concern came from Coinbase’s Christine Sandler. She admitted in an interview that their previous providers were selling data to outsiders. Although she didn’t name anyone, Chainalysis was quick to refute her allegations.

Later on, co-founder and CEO of Coinbase, Brian Armstrong admitted that they didn’t evaluate every aspect thoroughly before selecting Neutrino, a blockchain intelligence startup acquired to prevent thefts of funds, attacks and hacks on Coinbase. He said that after evaluations they had transitioned out some workers.

In addition to these indirect approaches to disassociate itself from this fiasco, Coinbase also made it hard for its users to delete their accounts from the service. Many users were unable to delete their accounts after learning about the data breach at the company. Some of them even took it to Twitter and reported their experience.

According to Coinbase, Chainalysis isn’t the only one involved in selling user data. Elliptic, a company that aims to detect illicit activities in cryptocurrency and report it to authorities, was also highlighted by Coinbase. The CEO of Elliptic, James Smith addressed the claims and rejected any responsibility of data leakage. He declined the accusation by stating that they were not provided with any user details by Coinbase in the first place, so the possibility of a data breach from their side is impossible.

When the news propagated that user data was leaked, users’ perception against Coinbase changed drastically. In a bid to earn back the trust of its users, Coinbase has taken a number of actions till now. However, nothing has helped much in the way of clearing things for the users; there’s still ambiguity behind the data breach. As no one has been able to disprove the allegations made against them, new developments may be in the offing as more details are learnt.


Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at editor.opinions@blockpublisher.com

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