Coinbase Reduces Unnecessary Account Freezes by 82%

Coinbase, a prominent cryptocurrency exchange, has made significant strides in reducing unnecessary account restrictions. According to Brian Armstrong, the CEO of Coinbase, the platform has successfully decreased the number of unnecessary account freezes by 82%. This announcement comes as a response to long-standing user complaints about account restrictions that have persisted for an unacceptable length of time.

Armstrong acknowledged the issue, stating that unnecessary account freezing has been a major problem for Coinbase users. He emphasized that while there are underlying reasons for the initial surge in account restrictions, the priority now is to fix the issue and continue making improvements. Armstrong assured users that the exchange will announce further enhancements as they are implemented.

Dor Levi, the founder of smIXL, a blockchain data simulation and analysis firm acquired by Dune Analytics, joined Coinbase with the specific goal of addressing the account restriction problem. Levi detailed the steps taken by Coinbase to mitigate this issue, noting that the goal is to make account freezes rare and only necessary in specific circumstances, such as legal obligations or protecting customers from scams.

Levi highlighted several measures Coinbase has adopted to reduce account restrictions. These include significant investments in machine learning models, infrastructure, and teams, which have improved the precision and recall of Coinbase’s models, resulting in fewer restrictions and freezes. Additionally, the exchange is moving processes like source-of-funds verification and enhanced know-your-customer (KYC) validation into the Coinbase app to expedite the removal of restrictions. This shift means that most restriction types will have self-service flows, making the process more efficient.

Coinbase users have long expressed frustration with account freezes, which have been a persistent issue despite the exchange's efforts to address it. In December 2024, EthHub co-founder Eric Conner complained on X that his Coinbase account was locked while trying to execute a transaction, purportedly due to the use of a virtual private network (VPN). This sparked a wave of similar complaints from users who reported being locked out of their accounts for extended periods.

Coinbase product director Scott Shapiro explained that the exchange’s risk models automatically flag access through VPNs, which are often used by malicious actors. While some users supported Coinbase’s efforts to protect accounts, others, like Connor, criticized the implementation as lazy. The problem of frozen accounts persists, with users continuing to report issues despite Coinbase’s attempts to resolve them. A user replied to Levi’s post, stating that his account had been frozen for a week after trying to send a small amount of crypto to a new account, highlighting the ongoing challenges faced by Coinbase users.