Biometric Privacy Battle Paused as Coinbase Awaits Legal Clarity

A U.S. district court has granted a temporary stay in a class-action lawsuit against cryptocurrency exchange Coinbase, which alleges the company violated Illinois’ Biometric Information Privacy Act (BIPA) by collecting and sharing users’ faceprint data without consent. The stay, requested by Coinbase, was approved by Judge Sharon Johnson Coleman of the U.S. District Court for the Northern District of Illinois, Eastern Division. The court ruled that the stay would streamline litigation and reduce the burden on all parties involved by allowing the case to await the outcome of a related appellate court decision involving Nuance Communications and Charles Schwab [1].

The lawsuit, filed in May 2025, claims that Coinbase’s use of biometric data—collected under its Know Your Customer (KYC) requirements—violates Illinois law, as users were not adequately informed of the collection or sharing of their biometric data with third-party verification providers. Under BIPA, violations can result in damages of up to $5,000 per instance for reckless or intentional violations and $1,000 for each negligent violation [1]. The plaintiffs also seek reimbursement for litigation costs.

The stay decision comes amid a broader legal and regulatory landscape tightening around biometric data collection and use. Illinois has recently passed two major laws governing cryptocurrency, including the Digital Assets and Consumer Protection Act, which places stricter oversight on exchanges and mandates cybersecurity measures and consumer transparency [4]. These developments reflect a growing emphasis on protecting user data in both the financial and tech sectors.

Coinbase has also faced scrutiny over a separate data breach in May, where customer support contractors in India were found to have accessed user account data for financial gain. While the breach did not directly involve biometric data, it contributed to multiple lawsuits against the firm for alleged mishandling of personal information [1].

The pending appellate court decision on the Nuance-Schwab case is expected to clarify the legal boundaries of BIPA, particularly regarding exemptions for financial institutions. This outcome could significantly influence the trajectory of the Coinbase litigation. The court emphasized that the stay would not prejudice the plaintiffs and that the case’s core issues could be simplified by aligning with the appellate ruling [1].

The decision also highlights the increasing legal challenges faced by companies employing biometric authentication technologies. As AI and biometrics continue to merge in identity verification systems, concerns over data privacy, consent, and regulatory compliance remain at the forefront. In financial services, the adoption of these technologies is accelerating, but with it, the need for clear legal frameworks to govern their use [3].

Source:

[1] US District Court for the Northern District of Illinois, Eastern Division (https://cointelegraph.com/news/court-stays-coinbase-lawsuit-biometric-data)

[2] Law360 (https://www.law360.com/articles/2379739/coinbase-users-biometric-privacy-suit-paused-amid-appeal)

[3] TSYS Insights (https://www.tsys.com/insights/2025/08/19/ai-and-biometrics-a-perfect-match-made-in-payment-authentication)

[4] MEXC News (https://www.mexc.co/en-IN/news/illinois-enacts-two-major-new-laws-to-regulate-crypto/66496)