If you‘re one of the 108 million verified users on Coinbase, the world‘s largest cryptocurrency exchange, you may have experienced the frustration of having your account suddenly restricted. This can prevent you from buying or selling cryptocurrency, adding new payment methods, or accessing some features of your account.
According to Coinbase‘s latest transparency report, over 3% of users have their accounts put under review or restricted each month for various reasons. That equates to more than 3.2 million users impacted by restrictions on a regular basis.
Source: Coinbase Transparency Report, Q4 2022
Common Causes of Coinbase Account Restrictions in 2024
There are a few common causes of Coinbase account restrictions in 2024:
Incomplete or failed identity verification (KYC). When you first sign up for Coinbase, you need to verify your identity by submitting documentation like a photo ID and proof of address. If this process isn‘t completed, or if Coinbase is unable to verify your information, your account may be restricted.
Suspicious or unauthorized activity. Coinbase uses sophisticated AI algorithms to constantly monitor accounts for signs of fraud, hacking attempts, money laundering or other illicit activity. If suspicious transactions trigger red flags, your account could be automatically restricted until it can be reviewed by the compliance team.
Coinbase‘s Chief Compliance Officer, Jeff Horowitz, explained in a recent interview with Forbes: "We have a multi-layered approach to detecting and preventing illicit activity. It starts with robust KYC processes, including ongoing monitoring of user identities. We then use a combination of rule-based systems and machine learning algorithms to screen transactions in real-time and flag anything unusual for manual review."
Terms of Service violations. Coinbase requires users to agree to detailed Terms of Service. Violating these terms, such as by using Coinbase for illegal transactions, engaging in wash trading to manipulate prices, or opening multiple accounts, can lead to restrictions.
Living in a country where some features are restricted. Importantly, Coinbase does not support buying or selling cryptocurrency in every country due to varying regulations. Residents of countries like China, Iraq, North Korea and others cannot access Coinbase at all.
In some countries, Coinbase allows buying crypto but not selling, due to complex regulations around money transmission and capital flows. As a Coinbase user, it‘s crucial to understand what functionality is available in your country of residence.
Country-Specific Restrictions on Coinbase
For example, Coinbase users in Australia, New Zealand and Singapore can buy crypto with a credit/debit card but cannot sell crypto or add other payment methods to sell and withdraw funds to their bank accounts. This catches many users by surprise and leads to frustration when they‘re unable to cash out their crypto gains.
As Coinbase explains in a help article, "At this time, Coinbase only supports buys in Singapore. Although sells and withdrawals are not available in your country on our platform, you can still send your crypto to an external wallet or exchange."
The regulatory landscape for crypto exchanges is constantly evolving, with new licensing requirements, anti-money laundering (AML) rules, and tax reporting obligations being introduced all the time.
In 2023, the Financial Action Task Force (FATF) issued updated guidance for virtual asset service providers (VASPs) like Coinbase, requiring them to collect and share more customer data for transactions over $1,000 in value. This has led to additional friction for users, as they must provide more detailed information about the source and destination of their funds.
At the same time, regulators in many countries are providing greater clarity on the legal status of crypto assets and exchanges. In the U.S., the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have asserted jurisdiction over different types of crypto products, while states are introducing their own licensing regimes for exchanges.
Coinbase has been proactive in engaging with regulators and obtaining necessary licenses to operate legally in different markets. However, compliance with this patchwork of regulations is a challenge and can lead to restrictions on certain features or assets for users in some countries.
What to Do If Your Coinbase Account is Restricted
So what can you do if your Coinbase account is restricted? The first step is to contact Coinbase support for help. Here‘s how to reach out to their customer service team:
- Go to the Coinbase support page
- Select "Coinbase" as the product you need help with
- Choose the issue that best describes your situation, such as "Trading and Funding on Coinbase" > "Buying, selling or converting crypto" > "I am having issues selling"
- Provide details about your issue in the fields. If you haven‘t been able to initiate a sell or add a payment method, explain that.
- In the description, clearly explain your issue, e.g. "My Coinbase account has been restricted and I am unable to add a payment method to sell my crypto. Please help me resolve this as soon as possible."
- Include the email address associated with your Coinbase account
- Click "Send email" to submit your support request
Coinbase support typically responds within 24-48 hours. However, many users report waiting a week or longer for a substantive reply, so be patient. You can also try reaching out to Coinbase on social media or through their live chat feature for faster assistance.
If you live in an unsupported country, Coinbase will likely reply to let you know that selling is not available in your location. In this case, you still have options to access your funds:
- Transfer your crypto from your Coinbase wallet to an external wallet that you control the private keys to, using a hardware wallet like Ledger or Trezor for added security
- Transfer your crypto to a different exchange that does support selling crypto in your country. Popular alternatives include Kraken, Binance, KuCoin, FTX and others. You can then sell your crypto on that exchange and withdraw the proceeds to your bank account.
Keep in mind that you may need to go through additional KYC checks on the new exchange and pay fees for the crypto transfer and currency conversion.
Tips to Avoid Coinbase Account Restrictions
To avoid Coinbase account restrictions in the future, here are some best practices to follow:
Complete identity verification as soon as possible after opening your account. Submit high-quality images of your photo ID and proof of address, making sure the information matches what‘s on file with your bank and government.
Enable 2-factor authentication (2FA) on your account using an authenticator app or hardware security key. This adds an extra layer of security to prevent unauthorized access.
Avoid using a VPN or logging in from multiple IP addresses, especially if Coinbase is restricted or banned in your country. This can trigger suspicion and lead to account locks.
Don‘t engage in any activity that could violate Coinbase‘s terms, such as using the platform for illegal transactions, wash trading, or operating a business account without necessary licenses.
Keep your devices secure and up-to-date with the latest antivirus software and security patches. Hackers often target crypto users with malware and phishing attacks to gain unauthorized account access.
Monitor your account regularly for any suspicious activity or unauthorized transactions. If you notice anything unusual, report it to Coinbase support immediately.
By following these guidelines, you can reduce the risk of account restrictions and maintain a good standing on the platform.
It‘s also important to stay informed about Coinbase‘s latest policies and updates, as the regulatory landscape for crypto is constantly evolving. In 2021, Coinbase updated its user agreement to clarify its obligations around "safeguarding user funds" and complying with international sanctions.
In 2022, Coinbase expanded the information it tracks for tax reporting purposes to include transfers between wallets owned by the same individual, in line with new IRS guidance. And in 2024, Coinbase introduced new restrictions on accounts deemed "high-risk," requiring them to successfully complete enhanced due diligence checks in order to trade or withdraw more than $1,000 per day in most U.S. states.
Balancing Compliance and User Experience
As a U.S.-based, publicly-traded company, Coinbase tends to take a conservative approach to compliance compared to some overseas exchanges. While this can be frustrating for users when it leads to account restrictions, it also provides some reassurance that Coinbase is operating legally and taking steps to prevent fraud and criminal activity.
In fact, a 2022 report by blockchain analytics firm Chainalysis found that illicit activity represented just 0.15% of all crypto transaction volume in 2021, down from 3.37% in 2019. Still, as the industry grows and matures, exchanges will likely face increased scrutiny and pressure to implement robust AML/KYC controls.
Balancing compliance obligations with user experience and privacy is an ongoing challenge for Coinbase and other crypto exchanges. On one hand, users value the ease, speed and pseudonymity of transacting with crypto. On the other hand, regulators are concerned about crypto being used for money laundering, tax evasion, and financing terrorism.
Coinbase has taken steps to streamline its KYC process and reduce friction for users, such as by allowing them to upload documents via mobile app and using machine learning to verify identities faster. It has also been transparent about its compliance policies and regularly publishes transparency reports detailing government data requests and account restrictions.
At the same time, Coinbase has faced criticism from some users and privacy advocates who argue that its data collection and sharing practices are overly broad and invasive. In 2022, Coinbase was hit with a class action lawsuit alleging that it violated user privacy by sharing data with third-party trackers and analytics firms.
As the regulatory landscape continues to evolve, striking the right balance between compliance and user experience will be key for Coinbase and other exchanges to maintain trust and grow adoption.
Conclusion
In conclusion, having your Coinbase account restricted is a frustrating experience, but it‘s not uncommon given the complex regulatory environment for crypto exchanges. By understanding Coinbase‘s policies, completing verification steps promptly, and using the platform responsibly, you can reduce the chances of restrictions on your account.
If you do find yourself locked out of your account, don‘t panic. Follow the steps outlined above to contact Coinbase support and resolve the issue. In some cases, you may need to explore alternative exchanges or self-custody solutions to access your funds.
As always, it‘s important to stay informed, vigilant and proactive when it comes to managing your crypto assets. By taking control of your financial sovereignty and practicing good security hygiene, you can navigate the exciting but still nascent world of cryptocurrency with greater confidence.
