The Fifth Circuit Court of Appeals in New Orleans has classified Coinbase, a cryptocurrency exchange, as a regulated financial institution after the exchange disclosed information about its client at the request of the FBI, iHodl Russia has learned.
The decision was made when considering the appeal of Richard Gratkowski, sentenced to more than five years in prison for the purchase of prohibited child pornography. Earlier, the FBI found out that between June 2016 to May 2017, Gratkowski used bitcoins to purchase illegal content.
Having identified Gratkowski's cryptocurrency wallets, the FBI reached out to Coinbase to disclose customer information. The exchange complied with the requirements without a court order. After that, the FBI searched Gratkowski's house and found a hard drive with prohibited materials. During the trial, Gratkowski challenged the allegations, citing the Fourth Amendment to the United States Constitution.
According to Gratkowski, crypto-related transactions should be protected the same way as information about the location of a mobile phone. However, the court concluded that cryptocurrency is not an integral part of everyday life, noting that transparency of the blockchain greatly affects the privacy of its users.
The court also added that Coinbase deals with virtual currency while traditional banks deal with physical one.
"But both are subject to the Bank Secrecy Act as regulated financial institutions," the court clarified.
iHodl previously reported that one of the largest cryptocurrency custodians on the market, Coinbase Custody, was chosen by 21Shares AG as a custodian for Bitcoin ETP.
Subscribe to our Telegram channel to stay up to date on the latest crypto and blockchain news.
Access more than 50 of the world's financial markets directly from your EXANTE account – including NASDAQ, London Stock Exchange and Tokyo Stock Exchange.