Biometric Privacy Law Could Reshape Crypto Compliance for Years to Come

A U.S. federal judge has granted a temporary stay in a class-action lawsuit against cryptocurrency exchange Coinbase, which alleges violations of Illinois’ Biometric Information Privacy Act (BIPA). The court’s decision, issued by Judge Sharon Johnson Coleman in the U.S. District Court for the Northern District of Illinois, Eastern Division, allows proceedings to be paused pending a ruling from the U.S. Court of Appeals for the Seventh Circuit on a related case involving Nuance Communications and Charles Schwab. The appellate court’s decision could influence the legal framework applicable to Coinbase’s use of biometric data for Know Your Customer (KYC) identity verification processes [1].

The lawsuit, filed in May 2025 by a group of Coinbase users, claims the platform’s “wholesale collection” of faceprints from users who upload government-issued IDs and selfies violates Illinois law. The plaintiffs also allege that Coinbase shared this biometric data with third-party verification providers without user consent. Under BIPA, violations that are deemed reckless or intentional may result in damages of up to $5,000 per instance, while negligent violations can incur $1,000 in compensation. The plaintiffs also seek reimbursement for litigation expenses [2].

Coinbase’s motion to stay the case was based on the legal uncertainty created by the pending Seventh Circuit ruling in Cisneros v. Nuance Communications, Inc. In that case, the lower court had dismissed the lawsuit, determining that Nuance Communications, a voice biometric service provider, was exempt from BIPA under the financial institution exemption due to its role in providing services closely related to banking. The Seventh Circuit is now reviewing the dismissal, and Coinbase argued that its own case hinges on the same legal interpretation of the exemption [3].

The court granted the motion to stay based on three key factors: the potential for simplifying the legal issues, reducing the burden of litigation, and minimizing prejudice to the plaintiffs. Judge Coleman found that waiting for the appellate court’s decision would streamline the trial and allow for a more efficient resolution of the central legal question. The court also determined that the stay would not unfairly disadvantage the plaintiffs, as the Cisneros case is expected to be resolved within a reasonable timeframe and there is no indication that the stay would extend indefinitely [4].

The ruling underscores the broader legal challenges facing tech and financial companies in the use of biometric data, particularly under state-level privacy laws like BIPA. Similar cases have emerged in recent months, including a $47.5 million settlement by Motorola Solutions for alleged violations of BIPA through its FaceSearch technology. The outcome of the Seventh Circuit’s decision could have significant implications not only for Coinbase but for other companies relying on biometric authentication in the financial and digital services sectors [5].

Source:

[1] title1 (https://cointelegraph.com/news/court-stays-coinbase-lawsuit-biometric-data)

[2] title2 (https://in.tradingview.com/news/cointelegraph:e74830c56094b:0-us-court-grants-brief-stay-in-coinbase-lawsuit-involving-biometric-data/)

[3] title3 (https://law.justia.com/cases/federal/district-courts/illinois/ilndce/1:2025cv05313/478099/37/)

[5] title6 (https://www.tsys.com/insights/2025/08/19/ai-and-biometrics-a-perfect-match-made-in-payment-authentication)