Coinbase To Verify Your ID With Live Webcam – Bail Now From Centralized Exchanges

The freshly-licensed Coinbase is a bellwether of what to expect from centralized bitcoin exchanges. This is true not only in the U.S. but wherever regulation forces exchanges to serve the state and crony-banking system from which bitcoin offers escape.

No wonder decentralized exchanges, like Localbitcoins, are breaking their own volume records on a weekly basis. The peer to peer exchanges are imperfect. But for the cautious and the informed, they are a return to the privacy and financial freedom that made bitcoin a beacon.

Also read: Norwegian Prosecutors Seek 120 Bitcoins in Court Restitutions

The Threat Of Coinbase

Late in February, a Reddit thread on Coinbase erupted. The exchange had implemented a new method to verify identities. The first post in the thread captured the change and the dominant reaction to it.

Just tried to help a friend register an account and they’re demanding access to her webcam?!?! “we will require you to take a photo of yourself with your webcam”….but no law or regulation requires this. I have accounts with 3 brokerage firms, 2 banks, and Gemini, and none have ever demanded access to my computer’s hardware. Coinbase, what are you trying to pull here? Accessing our computer’s hardware is not required by… laws/regulations. What’s your true endgame?

Coinbase’s accelerated ID verification is part of its commitment to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws – two incredibly invasive measures that destroy financial privacy. Coinbase’s new layer of verification uses facial recognition technology to correlate a live real-time face shot from a webcam or smartphone with the image of ID being submitted at the same time by an account applicant or with the data already on file for an account holder. (The process is described with images here.)

Not everyone seems to be subjected to the increased scrutiny. Perhaps those who appear suspicious. Perhaps they belong to a ‘wrong’ category such as ‘non-American.’ Or Coinbase may be gradually implementing the technology in order to iron out the myriad problems being experienced by users. A Reddit poster with an existing Coinbase account wrote;

I’ve had an account for three months and all of a sudden when I went to but [sic] more Bitcoin I was taken to a page to verify my identity again. I had already done that by uploading my license. This time they made me use my webcam and it took me eight tries because they kept saying it was too blurry.

Whatever the reason and unless there is a considerable downside, Coinbase is unlikely to forgo a process that protects it from government and provides commercially valuable data. The process is more likely to become the norm for centralized exchanges.

The Long Path To Your Identity Strip Search

Coinbase Triple Verifies ID Through Live Webcom, Bail Now From Centralized ExchangesThe change has been coming for some while. Jumio, an online mobile payments and ID verification company, unveiled its new Face Match feature in September 2013. In March 2014, a Coindesk article announced Jumio’s Bitcoin Identity Security Open Network (BISON) which targeted a client base “of bitcoin exchanges, wallets, and ATM providers worldwide.” The article indicated future data-sharing plans, which may or may not be optional; the description is confusing and gathered data is often shared despite guarantees to the contrary. The article continued, “BISON client businesses will also have access to regularly updated data regarding success rates, failure rates, account openings, transaction failures and fraud attempts within the network…”

In November 2016, Biometric Update heralded Jumio’s innovative melding of Face Match with a bitcoin focus; Coinbase was specifically mentioned.

Jumio’s Netverify now includes Face Match and ID verification, a three-pronged approach to the…[KYC] process on mobile devices by confirming an identity and the validity of the person presenting the ID….[Coinbase can] ensure the person with the ID matches the identity on the card before approving increased buy/sell limits within the marketplace.

This February, Netverify Document Verification was publicly unrolled and declared to be the “first web and mobile document verification solution to meet KYC and AML requirements for pertinent account information.” Coinbase implemented the system in that same month, but the exchange does not seem to restrict its application to “increased buy/sell limit” requests.

Centralized exchanges are becoming unapologetic arms of the state. They are rushing to over-comply with laws that gut the privacy and protection of their customers.

The Unbearable Lightness of Peer to Peer

Coinbase Triple Verifies ID Through Live Webcom, Bail Now From Centralized ExchangesMy experience in opening a Localbitcoins account stands in sharp contrast. It took me less than two minutes yesterday morning to register. A follow-up email contained a link upon which to click and constituted the only ID verification. Presumably, an anonymous but valid email address would have sufficed. In a February 12, 2017, Bitcoin.com article, Jamie Redman added, “There is an option to upload a state-issued identification card, license, and a phone number. Verifying these IDs does add more trust to the buying and selling process as far as reputation is concerned. However, users can opt out of these verification processes and still conduct trades on the platform.”

How does Localbitcoins function? Established in 2012, it is a type of Craigslist that connects individuals within certain regions who wish to sell or to buy bitcoins. Sellers advertise on the website where they state details such as the selling price and the payment methods accepted. Buyers reply and either meet the seller in person with cash or arrange for alternative payment — for example, through Paypal, gift cards, or Western Union. Localbitcoins offers escrow and conflict resolution as well as a feedback mechanism by which traders can be rated.

As of August 2016, about 1.35 million members were reportedly registered from 249 countries, and the value of weekly transactions exceeded $14 million.

Localbitcoins is not the only peer to peer exchange. Three others often mentioned favorably are Bitquick, Bitsquare, and Wall of Coins.

Conclusion

Every way of transferring wealth has risks. Forums on peer to peer trading are rife with tales of scams but, then, so are forums on mainstream exchanges. Coinbase has been accused of arbitrarily closing accounts and of canceling transfers when a change in bitcoin’s price acts to its disadvantage.

But the greatest risk is the regulation of bitcoin which peaks when governments, like Venezuela, crackdown with brute force. The greatest threat to financial freedom is the coalition of governments and central banks, both of which need your cooperation and data to function effectively. Centralized bitcoin exchanges are fast becoming a means to gather both. They are fast blurring into banks.

What do you think about centralized exchanges and increased verification practices? Let us know in the comments below.


Images courtesy of Shutterstock, and Pixabay. 


Need to calculate your bitcoin holdings? Check out our tools section.

  • Sheila Rasmussen

    They shouldn’t require anything more than any other financial institution asks for. I opened a new bank account the other day and all they needed was my driver’s license and that is all any bitcoin exchange should have the right to request as a form of ID. As for Coinbase, they have done a lot of really shady things, especially since the price of Bitcoin started climbing. I have no doubt that if the transaction is not in Coinbase’s favor that they will cancel the transaction and even close an account if the member gets upset about their questionable decisions.

    • Good morning, Sheila, and agreed. Coinbase is overcomplying — going considerably beyond what the law requires. You see this behavior in institutions that either live on gov. money (e.g. universities) or want to court gov. favor (Coinbase).

      I’ve heard so many complaints from Coinbase users that I have no doubt there is a company policy of canceling transactions if the company would lose money due to price fluctuation. This company, IMO, is no better than a central bank. Thanks for the post!

      • Do you think Tech firms that need to register/incorporate will continue to do so in these large legacy jurisdictions? Or could we see a trend in registrations/incorporations in smaller more free-market biased jurisdictions? Those who don’t need to can forgo the process altogether and simply exist unregistered/unincorporated.

        • Hi Mike. Thanks for the posts. My answer to your question is complicated in that it is both “yes” and “no.”

          The “no” part. I am far, far more ‘connected’ to the cyber- crypto-punk style advocates of digital currencies than I am to the “let’s get respectable” crowd. Which means my perspective may be skewed and biased. But there are enough *hugely* talented individuals who are adamantly committed to digital currencies as a path to individual freedom that paths toward autonomy and away from social control will be pursued in innovative ways. You mention one of them: forgoing “the process altogether and simply exist unregistered/unincorporated.” Sounds like the ideological core of bitcoin itself. The trick will be to forgo the process in a manner that does not incinerate you. I think we will be seeing a great deal of that dynamic and the details may not be offered up for public consumption. On the other hand, these guys and gals are all “open source” people…so who knows?

          The “yes” part. Many of the companies that “need” to comply with government regulations — and NO ONE needs to comply because it IS a choice — will continue to do so because they wish to make a profit without taking avoidable risks. They will pass on the risks and rights violations to their customers because, well, they can. Moreover, many of their customers will not be upset because they have the “let’s trade freedom for security” mentality which is popular these days.

          So both paths will exist in parallel. Or that’s my prediction. I tend to agree with the guru who introduced me to bitcoin years ago: it is unstoppable. I tend to disagree with him: gov. is not helpless in this arena. It is able to inflict great harm on individuals…and that prospect appalls me. I don’t have the cyber-punk mentality of “let it rip” because part of what will be ripped are innocent, good people.

          • Yeah I know a lot of PTs have recently taken up such an attitude. The legacy western (mostly leftist) imperialist have taken the same position towards human resources as they have to physical resources. That’s a threat to the very PT way of life. We’d all rather die than allow that to happen.

            Same for most other exceptionals. Sadly, I know of several analyst who’ve committed suicide just last year. I guess they found it preferable to that than to surrender. It’s sad but also effective. They can’t be exploited now, no benefit can be derived from them now, and in the desperate state of the imperial/neocolonial status quo, every potential solution cut off is a terminal blow!

  • Billy Williams

    This really goes against The law of bitcoin. If i wanted someone to know what i look like at the present i would just use a regular bank and not bitcoin. I will never use coinbase again.

    • That is exactly the type of feedback Coinbase and other centralized exchanges need to hear. Exactly.

      • Michael Makanjuola

        I am really frustrated about coin-base mode of operation, my money is just seating in coin-base account for almost 3months now, they give option to put more money to my coinbase account but there is no option to withdraw my money. I had uploaded about 2 forms of ID they refused to verify it, instead they are still asking me to upload another ID.

        • That sucks. I just resolved a problem with a wallet and it really took an emotional toll to have hard-earned money held hostage. If it gives you some encouragement, the majority of similar problems — at least the ones I’ve heard of — have been resolved…after angst and time, that is. Still sucks.

  • OJ Jordan

    Coinbase is almost the enemy of the Bitcoin concept. They are the easiest and most user-friendly on one hand, on the other, they are controlling and they cheat a lot too. The other day when the ETF failed to be approved the price dropped and I was one of a few hundred if not thousands of members trying to sell before the drop and guess what. The page couldn’t load for about 3-4 minutes. As soon as it came back on, the price was down by $100. Sweet. They also close members accounts left right and centre on the grounds of suspicious Money Laundering and all that… Get the $10 bonus when you first sign up and move to Blockchain or elsewhere. Coinbase must end. It is doing more damage to Bitcoin than good these days.

    • I hear (or, rather, read) the same complaint as yours (in spirit if not in specifics) on so many forums. It was an eye-opener when I visited the Coinbase site itself and saw the sheer quantity of complaints about transfer and being locked out of accounts. Unfortunately, I believe Coinbase will thrive, in terms of making a profit, because it seems to be actively partnering with government. In response to another poster, I mentioned its role in auctioning off crytocurrencies seized by the police but I suspect that its cronyism extends farther. For one thing, I am suspicious of why the IRS dropped its lawsuit against Coinbase without real explanation. I suspect the IRS received what it wanted from Coinbase despite the latter’s loud protestation of fighting the order to turn over extensive customer info.

      • OJ Jordan

        I’m doing a review on Jaxx wallet – open source, multiple coins supported and wait for it….. Internal Exchange between each coin supported. Shapeshift from ETH into Dash.. no problem. I will do a video on my youtube channel today. Find me. I don’t want to spam with links here.

        • Thanks for your consideration. Appreciated. I will be checking out your YouTube channel later today. I’m really glad you are being part of the solution.

  • disqus_PZnJh55Id4

    Coinbase has done some shady things in the past. I hope they want a picture of me, I will just go visit them in person as I live in the bay area. Someone should go tour the operations and see how they operate.

    • If you do so, then please let the rest of us know. A skeptical eye seems to be what’s called for.

  • Erik

    Sure coin-base is centralized, but if you want to make proper use off chain or side chain, and instant payment solutions than you kind have to depend on centralized solution. IF this is not your cup of tea, i suggest you take a look at DASH

    • The problem is not centralization — at least, not in my book — but the company’s invasive policies and the various ways in which it violations customers’ accounts/transfers. I think Coinbase is dangerous to people’s liberty and unethical in its practices to boot. I DO understand the advantages of a centralized service and having one that is both customer-friendly and ethical would be welcomed.

      • Erik

        Thx, you for your reply. I don’t thinks because of what Coinbase wants to do but what it’s forced to do but Government entity’s, and that only because Governments can easily put pressure on central entity’s, by doing so the turn them in to evil entity’s.

        Personally if things get this centralized in this way, bitcoin will have failed, in many way it has already but the could always make a good comeback to there roots.

    • You tellin me dash has an easy way to cash out? Easy on/off ramps – from crypto to USD and back again?
      Ok where?

      • Erik

        They are integrating more and more 3th party’s as for on an off again ramp the most important ones right now are: wall of coins, and Dashous is being build (dash it version off localbitcoins). Dash has over 1/2 milion in funding each month, be sure they will use some of does funds to integrate even more.

        The are also looking into creating Point of sales devices for local stores, this not just a technical question but also a legal question. This legal question cost allot of money, if dash keeps rising in price they may very well have the funds to integrate. Please not this is not via any 3th party but completely decentralized of the DASH network itself.

        And if you have good idea yourself and you want to build it and get funded to build it, you can put up a proposal, and if masternode voters think it’s good enough you will get funded.

  • Lee

    uber does identity checks with photos

    • Hmm. Does Uber rely on the live real-time webcam method for verification? I know Jumio is pushing hard for it to become the standard for online ID processing and that means reaching outside the crypto-community.

  • Tracer289

    Excellent article!

    The Internet Reformation continues.

    • I prefer Revolution myself! 🙂

      • Tracer289

        I don’t disagree. 🙂

        I do like the parallels between the Protestant Reformation and what Anthony Wile of The Daily Bell termed the Internet Reformation.

        The Gutenberg Press put information in the hands of the people and society ummm… reformed. This led to the American Revolution.
        Today I believe the internet is doing the same thing.

        An example;
        Due to the internet I am today exposed to the writing of luminaries such as Wendy McElroy!
        I’ve also posted material relating to the excise tax known as the income tax in the United States of America and how the internet is exposing it for all to see, if they care to.

        Whatever we call this change, it may be painful for some, liberating for others, regardless I am glad we are going thru it!

        I look forward to your next article!

  • why bother

    Wendy, I’ve been a Coinbase user for two years. I radically stopped spending in November 2016 when I read that any transaction is considered a capital gain. I have not used my shift payment card since that time. I have made small weekly buys but cut the amount way down. Now I buy with cash outside these central exchanges and not quite free of KYC but will do so. If I get that same request from Coinbase to take a picture with my webcam, yes I will do it that once since my account is otherwise held hostage. But onlymto log in again and sell everything- close the damn account. They tighten up e KYC crap then they lose my business. My days with CB are numbered. I just would prefer they get to me in 2018 so that I can postpone the capital gain tax.

    • Good. I would do the same thing and in the same manner. Coinbase is the exchange, BTW, that is working with various police departments to auction off cryptocurrency seized as the proceeds of crime. Of course, the crime in question could be nothing more than suspicion of money laundering…translation, protecting your own privacy and wealth from those who wish to confiscate both.

  • Dr. Bubó

    Coinbase’s security measures and limits are just pissing off every customer. Living in the UK and having a hungarian passport, I was simply unable to get my ID’s verified!!!!
    AVOID!

    • Good morning Dr. Short of Mt. Gox, Coinbase seems to have the worst reputation of any exchange in the bitcoin community. As part of the research for the article, I visited the foums attached to the Coinbase site where people ask for customer service and assistance. Slews of people are being shut out of their accounts because they are unable to verify their identity even though they have passports and have tried to jump through all the hoops. Quite a few were from the UK and from Hungary. Coinbase seems determined to lose clients. It makes me wonder whether their business model relies upon the government more than upon the free market.

      • I agree with everything you’ve said so far. But there are millions of people who don’t care one lick about their privacy or webcam photos or DNA or any of it. That’s right – some people genuinely don’t care at all.
        “It’s far easier to fool a man, than to convince him he’s been fooled”

      • Many if not most U.S. institutions are funded by (credit derived) capital these days. As such they don’t really need paying customers. Although that helps to keep up appearances. But don’t take my word for it, do your own due diligence (look at the statements of cashflows, $TWTR, $AMZN, et al).

  • Good Friday morning, everyone. I’ll be dropping in all day to chat and answer questions. And, true to my Irish roots….HAPPY ST. PATRICK’S DAY!!

  • webcams now? seriously?
    what’s next? the AML pervert says “huhu let’s see your butthole”

    • Stop now! Back away from the keyboard! You are giving them ideas.

  • Fritz Knese

    Hi Wendy. I am only half Irish so I bow to your superiority on things Irish like St Paddy’s day!
    In a truly free society a person would be who they said they were with transparency being the rule rather than the exception. Like in Smith’s Probability Broach, the “proof” of citizenship was having gold on the ledger at the local bar and grill. The more libertarians depend on tech to protect them, the worse they will be ultimately screwed as government takes more and more control. Back to basics survivalist type thinking is becoming more rational all the time.

    • A gracious but delayed “hello” to you, Fritz. Bitcoin has been on such a wild ride that I’ve been a bit distracted. If you visit my blog, however, I’ll be posting my famous (notorious?) Irish meatloaf recipt which will redefine meatloaf for you, Heck, if you ever make it up to my farm, I’ll make it for you in person.

      • Fritz Knese

        You are such a sweet Lady. I would love to visit you and Brad, but it will never happen. My life is falling apart rather quickly with major problems I am trying to deal with for my daughter and grandkids and the real bad arthritis which has really depressed me. I hope you and Brad remain healthy and happy!

  • JZA

    Why not talk about OpenLedger from Bitshares which offers true Exchange environments from an equally true descentralized network.

    • Open Ledger rocks!!!
      : )

    • It is not possible to talk about everything but I would be interested in anything you have to suggest.

      • JZA

        There has been a race for DEX (Descentralized Exchanges) unfortunately Bitcoinist people seems to throw a wedge to anything altcoin related. Ironically a lot of the innovation is there, and so happened for Bitshares which took the ‘colored coin’ concept to a new level, and have Digital Assets for everything US dollars, Gold, Silver, Euros, and also criptos like Bitcoin, Ethereum, Dash, Lisk, etc.
        Not just that but also have an Exchange platform for that (NXT also has something like that).. called OpenLedger, which has a look and feel similar to Poloniex, and you can trade between any altcoin. True, Bitshares is the based currency, but that doesnt meant that you cant just flip it back to the original altcoin. Only thing they need is more participation on the market.

        What I like about OpenLedger is that is all on the browser, no complicated installations, no need to deal with Java (Bitsquare), and you can be trading in no time. Bitshares are supported by ShapeShift so you can fund your account also pretty easily.
        NO AML, and / or KYC, also no heavy blockchain on your HDD.

        • Brad R

          What I like about OpenLedger is that is all on the browser, no complicated installations

          Correct me if I’m wrong, but when you’re using a browser to manage your cryptocurrency, you’re really trusting your coin to a third party, who have then made a web page to make it easy for you to manage your coin.

          The poster child for this was Mt. Gox. I’m sure you can imagine how happy I was that I decided to install wallet software on my PC, instead of using Mt. Gox’s browser interface to trade my Bitcoin.

          Now, if OpenLedger has a way to manage the coin entirely on my own PC, perhaps using the browser as a front end for a local applet, I might be interested.

  • Bitcoin_Friend

    This is going to happen every exchange out there in the future and it will be the death certificate of all crypto currencies. Coinbase are clearly having problems with authorities and some of their users have complained about their extremely slow support who have claimed that they are under heavy load and may take several days to respond (which is not something that should be expected from a major service)

    • If transactions shift from fiat to consensus currency then it’ll be difficult for that death certificate to materialise.

  • China puts the copy in as usual.