Coinbase Secures US Contract in Throwback to Soured Deal

Coinbase continues to gain influence despite regulatory headwinds. The leading U.S.-based cryptocurrency exchange has secured a contract with the Department of Homeland Security that’s worth a potential $1.4 million, surpassing the amount of another similar mandate for the company. Based on the terms of the agreement, Coinbase will deliver “application development software as a service” for the U.S. Immigration and Customs Enforcement (ICE) division.

I missed this in procurement feed yesterday, but cryptocurrency exchange platform Coinbase has a new award with ICE which is either 15x or nearly 50x as large as its previous award, depending on how you count.

It is Coinbase's largest fed contract.https://t.co/B4IsabH4sw

1/2 pic.twitter.com/zAwJILS0X1

— Jack Poulson (@_jack_poulson) September 18, 2021

It’s not the first contract that Coinbase has secured with the government. The company was also selected by ICE in August to provide “computer forensics services” to the agency for just under $30,000. The latest contract has a start date of Sept. 16 with an end date in a year from now and the potential for an extension until 2024.

‘Bizarre’ Acquisition

The deal brought up some bad memories on social media for the link that it has to a soured acquisition Coinbase made two years ago. In 2019, Coinbase acquired a company called Neutrino, paving the way for it to perform blockchain analytics.

Coinbase was quickly blamed for not performing proper due diligence after it surfaced that Neutrino, which made spyware tools, had ties to repressive regimes. The exchange was accused of being “wildly out of touch with its customer base.” Now that very deal appears to be what has catapulted Coinbase into the arms of the ICE.

Jesse Powell, who is at the helm of competing cryptocurrency exchange Kraken, was among those to question the reasons behind the contract. He recalled “the even more “bizarre…acquisition [Coinbase] made and reputational hit they took to be able to offer this service to the government.”

The response to the deal on Reddit was similarly met with skepticism.

Regulatory Headwinds

Coinbase has shed about 25% of its value since going public in mid-April of this year.

The company is currently battling some regulatory headwinds as it seeks to introduce a lending product with decentralized finance (DeFi) characteristics. Nonetheless, Coinbase CEO Brian Armstrong is not backing down. The company has most recently filed an application to expand into derivatives trading seemingly for products such as bitcoin and Ethereum futures, where it would compete with the likes of the CME.