Users report Coinbase restrictions – Here’s what can lead to account flagging

  cryptopolitan.com 06 December 2024 15:00, UTC

User reports on social media point out that Coinbase is restricting accounts, sometimes with no explanation. The restrictions come at a time when many coins and tokens are at an all-time high, while Coinbase grows its listings with meme tokens.

The inability to trade or transfer has been reported on social media, with no specific explanation from Coinbase. In the past few days, multiple crypto influencers complained of having their account restricted, with no sufficient explanation.

Hey @coinbase and @brian_armstrong why am I restricted from my 1.2 million on your “debanked app” ? pic.twitter.com/YWurFe6E3k

— Bullish (@TheBullishTradR) December 5, 2024

The restriction has also affected already verified long-term users and high-profile crypto influencers. The trend of restricted accounts has pushed users to move to Kraken, Crypto.com, Binance, and Bybit for multiple tasks from cashing out to trading memes.

Some of the recent account suspensions also included restricted access to assets or transfers. In the past, Coinbase has also flagged accounts for suspicious transactions, leading to weeks-long delays on new fund transfers. In some cases, access to crypto coins and tokens may take months, incurring potential losses.

Coinbase retains strict KYC and regional restrictions

Coinbase itself has a full KYC screening and proof of identity while limiting some jurisdictions. However, users are reporting frozen accounts after an initial period of trading and usage. The exchange has exhaustive rules on restrictions and can change both trading limits or outright ban users from accessing their accounts. Coinbase may also have confidential internal rules for flagging accounts, with no obligation to share their rationale with the end users.

The terms of service do not explicitly mention VPN usage, and some users even claim they have no troubles with specific types of VPNs. What is against the terms, however, is using VPN to connect from restricted regions, or trying to create multiple accounts.

The Terms of Service suggest Coinbase does not even have to provide a rationale for restricting accounts, but must give a two-month notice in those cases. The recent wave of suspensions arrived with no explanation and did not issue the two-month warning. Once an account is suspended, the users may only have a 90-day grace period to access and remove any tokens or coins in their balance.

VPN users may be flagged

Accounts may be flagged for using VPN – which may be intended to hide the origin of funds and the real location of the user. Scott Shapiro, product director of Coinbase, warned that VPN usage may be mistaken for an attack and flagged.

Coinbase algorithms trigger VPN alerts and flag the accounts suspected of exploits or potential money laundering. Once restricted or flagged, account recovery may take months, especially during times of slow customer service. Coinbase has also repeatedly demanded credentials from users refusing to complete their KYC profile.

In the past week, flagging continued even for customers who did not use VPN. The accounts were also flagged during peak market activity, thus restricting some users from realizing gains.

In addition to VPN, some types of apps or ad blockers may also trigger the Coinbase flagging mechanism. Some users have faced a full account freeze, while others only had a restriction on the ability to send funds.

The approach of Coinbase is to restrict traffic coming from known VPN servers, so there may still be users that are not flagged. Since Coinbase is a publicly traded corporation, it faces significant restrictions on its allowed customer base. Despite this, VPN remains widely used in crypto trading, even on the side of US-based users, accessing services that exclude the USA.

Crypto users often add VPN as an additional layer of confidentiality. The decision of Coinbase to restrict VPN usage led to a renewal of the #deleteCoinbase hashtag, a trend that has re-emerged multiple times on social media.

Coinbase retains its top reliability score, despite the recent social media trend seeking alternative markets. While Coinbase retains its rights to act against any suspicious accounts, the bull market enthusiasm is making the situation more difficult for long-term traders, or those that are in fact compliant.

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