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Coinbase Faces A New Scandal

The platform denies selling proprietary customer data and announces it is expanding into several European countries.

Coinbase Global  (COIN)  is having a wild week.

The cryptocurrency exchange platform confronted a report that it is selling Immigrations and Customs Enforcement a suite of features used to track and identify cryptocurrency users and announced that it was seeking licenses with various countries in Europe.

The Intercept reported that ICE has access to a variety of forensic features provided through Coinable Tracer, the company’s intelligence-gathering tool, which was formerly known as Coinbase Analytics.

Coinbase Tracer allows clients, in both government and the private sector, to trace transactions through the blockchain, a distributed ledger of transactions integral to cryptocurrency use.

 ICE is now able to track transactions made through nearly a dozen different digital currencies, including Bitcoin, Ether, and Tether, the Intercept said, citing a contract document released via a Freedom of Information Act request.

'Our First Concern'

Coinbase pushed back against the accusation. 

"We want to make this incredibly clear: Coinbase does not sell proprietary customer data," the company said in tweet. "Our first concern has been and always will be providing the safest and most secure crypto experience to our users."

The company said in a follow-up tweet that "our Coinbase Tracer tools are designed to support compliance and help investigate financial crimes like money laundering and terrorist financing."

"Coinbase Tracer sources its information from public sources, and does not make use of Coinbase user data. Ever," Coinbase said.

The denial sparked some sharp criticism on social media.

"You guys couldn't let Celsius have all the fun in the spotlight huh?" one person responded, referring to Celsius Network, which suspended fund withdrawals and other operations from its platform.

Expanding in Europe

"I’m never buying any more crypto on your platform. You probably allowing the government to track us with your new ICE deal," another person said.

"Translation: Coinbase does not sell user data to the gov," another tweet read. "Instead, they sell tools to the government that let them track your data."

Separately, Coinbase said it was seeking licenses with various countries in Europe. 

The company said it is in the process of expanding in France, Italy, Spain and the Netherlands. Coinbase said it is already on the ground in the UK, Ireland, and Germany.

The announcement comes at a time when Coinbase is feeling the impact of the crypto price collapse.

Last month Coinbase said it would cut 1,100 jobs, or roughly 18% of its workforce, and its share price value and market cap fallen since it went public last year.

'Building Around the World'

"We appear to be entering a recession," which "could lead to another crypto winter, and could last for an extended period," Coinbase said at the time. "While we tried our best to get this just right, in this case it is now clear to me that we over-hired."

In addition, JPMorgan analyst Kenneth Worthington lowered his rating on Coinbase to neutral from overweight, while cutting his price target by more than $100 to $68 per share.

Nevertheless, the company has its sights set on European expansion.

"During market downturns, the temptation can be to shy away from international expansion," the company said in a July 1 blog post. "We first entered the UK and EU during the bear market in 2015, a move that paid off significantly during the bull run a few years from then." 

The company said that "we’ll keep building around the world, and doing everything we can to grow the cryptoeconomy."