Coinbase CLO to Treasury: AI, Blockchain, and Zero-Knowledge Proofs to Catch Crypto Crooks! 🚀💰

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On Oct. 20, 2025, Paul Grewal, Coinbase’s chief legal officer (aka the Crypto Crusader 🦸♂️), took to X (formerly Twitter, because why not rename everything?) to urge the U.S. government to fight cryptocurrency-related crimes using blockchain. “When bad guys innovate in financial crime, good guys need innovation to keep pace,” said Grewal, basically channeling his inner Batman. 🦇 He shared an open letter he penned on behalf of Coinbase, providing the government with recommendations that are chef’s kiss perfect. 👌

Because, let’s face it, the Treasury asked for comments on “innovative methods to detect illicit activity involving digital assets,” and Grewal was like, “Hold my latte, I’ve got this.” ☕️✨

  • The letter is a response to the U.S. Treasury’s request for comment, which is basically a fancy way of saying, “Hey, we’re clueless, help us out.” 🤷♀️
  • In a series of posts that probably broke the internet, Grewal outlined policymaking directions aimed at enhancing AML practices through AI, zero-knowledge proofs, and other buzzwords that make us sound smart. 🤖✨
  • The letter itself proposes to amend the Bank Secrecy Act (because who doesn’t love a good legal overhaul?) and set guidelines to modernize identity verification rules. Because, let’s be honest, no one trusts a selfie ID anymore. 📸
  • This isn’t Grewal’s first rodeo. In 2024-2025, he was calling out Operation Choke Point 2.0, a practice halted by the Trump Administration in 2025. Because even crypto needs a hero. 🦸♂️

Grewal’s Message (aka The Crypto Manifesto)

Paul Grewal released the letter to the U.S. Treasury on Oct. 17, but shared the link on Oct. 20, because even legal eagles need a dramatic reveal. 🦅 In his X posts, Grewal gave the U.S. Treasury four recommendations that are basically the crypto equivalent of a mic drop. 🎤

  • Facilitate responsible use of AI to improve AML compliance. Because if robots can vacuum our floors, they can definitely catch money launderers. 🤖💸
  • Create guidance for API-driven AML compliance technologies. Because APIs are like the unsung heroes of the tech world. 🌟
  • Amend the Bank Secrecy Act to use zero-knowledge proofs and decentralized identification. Because privacy is cool, but catching bad guys is cooler. 🤫
  • Incentivize the use of blockchain-based methods for AML compliance. Because blockchain is the new black. 🔗

When bad guys innovate in financial crime, good guys need innovation to keep pace. @coinbase filed a response to @USTreasury’s Request for Comment to underscore this reality and 4 particular reforms UST…

– paulgrewal.eth (@iampaulgrewal) October 20, 2025

In his intro, Grewal emphasized that the “good guys” (aka the U.S. Treasury and Congress) should be as innovative as the “bad guys.” Because, let’s be honest, no one wants to be out-teched by criminals. 🤓

What’s in the Coinbase Letter? (Spoiler: It’s 40 Pages of Genius)

In a 40-page letter (because brevity is overrated), Grewal thanked the U.S. Treasury for the opportunity to propose solutions for fighting crime associated with digital assets. Because who doesn’t love a good thank-you note? 📝

In the executive summary, Grewal noted that money-laundering schemes have become so sophisticated, they could probably outsmart a chatbot. 🤖 But fear not! He proposed using blockchain and other innovative solutions to detect illicit activity and modernize the Anti-Money Laundering Act of 2020 and the Bank Secrecy Act. Because outdated laws are so last season. 🗑️

The letter gives recommendations on each of the Treasury’s topics, because why leave anything out? It’s like a legal buffet. 🍽️

Regarding APIs, Grewal wrote that the Treasury should facilitate their adoption through regulation. Because APIs are the unsung heroes of data sharing. 🌟 He also believes AI will revolutionize AML compliance, reducing false positives and freeing up resources. Because who doesn’t love a good efficiency boost? 🚀

As for digital identification, Grewal advocated for updating guidelines to include decentralized identification and zero-knowledge proofs. Because selfies are so 2010. 📸 He also emphasized that the existing Bank Secrecy Act’s customer identification policy is outdated and dangerous. Because no one wants to be stuck in the legal Stone Age. 🦖

In the Blockchain Technology section, Grewal called on the Treasury to recognize and incentivize the use of on-chain data. Because blockchain is the future, people! 🔗 He stressed that facilitating blockchain AML compliance will make everything more accurate, efficient, and protective of user data. Because who doesn’t love a win-win-win? 🎉

The rest of the letter answers specific questions from the Treasury’s request, outlining risks, inefficiencies, and other problems. Because no stone was left unturned. 🕵️♂️

Earlier, Grewal shed light on Operation Choke Point 2.0, an effort by FinCEN to force banks to deny services for crypto clients. Because even crypto needs a watchdog. 🐶 Eventually, the operation was halted under the Trump Administration, thanks to Grewal’s FOIA magic. 🧙♂️

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2025-10-21 23:09