Coinbase exec claims Layer-2 Network could contain AML measures

  • The upcoming launch of Base is expected to come with AML features
  • Base is an Ethereum layer-2 network that provides users with a secure and convenient way to develop decentralized applications

Coinbase CEO Brian Armstrong has suggested that the company’s upcoming layer-2 blockchain network Base could launch with transaction monitoring and anti-money laundering controls.

Armstrong claimed that Base currently has some centralized components in an interview with Joe Weisenthal on Bloomberg radio. However, according to the exec, it will “become more and more decentralized over time.” That said, Armstrong clarified that users of the new Layer-2 network will be subject to transaction monitoring and AML rules.

High expectations from Base

According to Coinbase’s CEO, the crypto exchange will be responsible for monitoring transactions. He continued,

“I think the centralized actors are the ones that are probably going to have the most responsibility for preventing money laundering issues and having transaction monitoring programs and things like that.”

Chris Blec, a proponent of decentralization, drew attention to Armstrong’s comments in a March 7 tweet.

Base is an Ethereum layer-2 network that provides customers with a secure, affordable, and developer-friendly way to create decentralized apps. It is created using Optimism’s “OP Stack” which enables fast transactions on Ethereum. Base entered the testnet phase on February 23 after the unveiling. While Coinbase has not yet announced a mainnet launch date, it is expected to be in the second quarter of 2023.

Last Tuesday, Coinbase’s share price rose about 10% to $64.83, marking its biggest daily increase since the stock rose more than 13% on Feb. 15. Before markets opened on Feb. 23, the company announced a brand new network called base. Since then, Coinbase shares are up about 6% from the day’s closing price of $61.18.

Instead of communicating directly with the primary backend network, the solution can save on gas costs and improve transaction processing time. In fact, Base makes transactions 10 times cheaper than if you interact directly with Ethereum.

In a blog post published at the end of February, five days after the company unveiled Base, Blec issued a warning against Coinbase’s most recent Layer-2 offering.

In his view, the use of “sequencers,” which are “nodes that generate and execute L2 blocks while relaying users’ activities from L2 to L1,” makes the layer-2 infrastructure extremely centralized.

The single sequencer for Base will be operated by Coinbase, a licensed money transmitter. This has raised the question of whether Base will become the very first L2 to formally enforce Know-Your-Customer (KYC) rules.

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