Too bad coinabase\s approach to crypto is centralized. They operate a blocklists to prevent people from sending funds to certain addresses . Even paypal does not do this.
Dumb question: How is such a block even effective? What keeps you from creating a temporary wallet outside Coinbase, sending your funds there from Coinbase and then sending the funds from the wallet to the blocked address?
I mean, I can understand the basic reason if the goal is to avoid money laundering (if this goal runs counter to crypto's intended purpose of anonymity then I have frankly not much sympathy with crypto here).
But I find it interesting that they do this even though they technically can't know if the intermediate address was really under your control. Wouldn't this make any transaction out of Coinbase inherently risky? Like, if I were a troll that wanted to get as many Coinbase accounts banned as possible, could I simply set up a service that accepts payment at a specific bitcoin address, then immediately pass on all payments to a blocked address - and have everyone who uses my service auto-banned from Coinbase?
It makes sense though that tracing the transaction chains can be a reliable way to find repeat offenders. If your transaction history shows a consistent pattern of "your account -> some random intermediate addresses -> blocked address" then there is reason for suspicion. No one has that much bad luck.
I didn't say they did do this, only that they can.
The goal doesn't seem to be simply to avoid "money laundering." Of the small sample of people I know who've been banned from Coinbase, all of them have been simply for transacting with gambling sites.
What's worse is that when they ban you they refuse to talk to you. No explanation, no justification, no appeal. Just an automated reply to look at their ToS and you can never hold a coinbase account again.
Unfortunately this is essentially what anti-money laundering laws require businesses to do. It's illegal to "tip off" a customer of the reasons you flagged them for being under suspicion of money launder/evading sanctions/funding terrorism. https://onlinelibrary.wiley.com/doi/10.1002/9780470685280.ch...
Yeah, because paypal doesn't allow sending and receiving bitcoins to begin with. For sure they block sanctioned individuals or customers from sanctioned countries like any financial institution. And if they implement crypto, for sure they will have as strict compliance as coinbase.
Most exchanges also use a service like Chainalysis to help identify which addresses need to be blocked or are high risk and need additional due diligence.