Coinbase Sets Focus On Addressing Long-Running Account Restriction Issues After Data Breach Hit To User Trust

Coinbase COIN is navigating a bittersweet moment. On one hand, the firm is just coming off arguably the highest point in its history: being included in the S&P 500. However, that was quickly marred by a data breach that left customers outraged.

Seemingly as part of efforts to soothe these disillusioned customers, the firm now says it is finally addressing a long-standing issue for users: unnecessary account restrictions.

“Account freezing has been a major issue at Coinbase for longer than is acceptable,” Coinbase CEO Brian Armstrong said last week on X. “I could list a bunch of the underlying reasons why it got so bad in the first place, but what’s more important is that we’ve made it a priority to fix.”

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Typically, accounts face restrictions or are frozen to comply with know your customer laws or in response to suspicions of illegal activity. But over the years, cryptocurrency discussion forums have been littered with complaints from Coinbase users who woke up to find their accounts suddenly restricted or frozen for no apparent reason.

“If you’re on CT [cryptocurrency Twitter], you know how significant this issue has been for users. I myself am a Coinbase user and our restriction experience is not meeting my own bar,” Coinbase Vice President – Product Dor Levi said in a post quoted by Armstrong.

Levi said Coinbase is making improvements to its machine learning models and infrastructure to enhance the precision of account lockups to address the issue. He said Coinbase has also implemented guardrails to ensure that it continues to improve this process. Also, he said that the company is now introducing an in-app self-service option, enabling users to efficiently remove restrictions.

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According to Levi, these efforts are already yielding results.

“We’ve reduced the frequency of account locks by ~82% so far,” he said. “The goal is clear: Account freezes should be rare, limited to situations that warrant them.”

Whether this effort will be enough to keep Coinbase users happy remains to be seen.

Coinbase disclosed in May that a group of hackers bribed overseas customer representatives to access sensitive data belonging to 1% of its monthly active users. While data breaches are not uncommon, details of the Coinbase breach justify a measure of concern. Reuters reported last week that the firm was aware of a data leak as early as January, raising questions about why it did not offer any disclosures till May.

The outrage has been further intensified by the fact that on-chain sleuths have been flagging an alarming rate of phishing attacks on Coinbase users for months, warning of potential leaks.

“Every investigator under the sun has been feeding your various teams evidence of these insane thefts and insiders for over 6 months,” MetaMask security researcher Taylor Monahan posted on X in May, questioning Coinbase’s commitment to user security.

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