Coinbase will be paying out customers of a website that connects Bitcoin investors to the legal system in the United States in exchange for bitcoins, a move that is aimed at providing legal recourse for those who fall foul of US laws against online money laundering and money transmitting.
Coinbase, which launched in 2011, is one of the largest bitcoin exchanges in the world and is one the few remaining businesses that are able to offer customers an option to buy bitcoins from its website.
It has so far raised $6.5 million from investors including Benchmark Capital, Blockchain Capital, and Digital Currency Group.
CoinBase is also expanding its offerings to countries that allow foreign-exchange-traded funds (FXCM) trading on foreign exchange markets.
“We are looking at doing some cross-border operations with some FXCM trading partners,” Coinbase chief executive Brian Armstrong said in an interview with CoinDesk.
“So, we are looking to make sure we are doing the right thing with that as well.”
In a blogpost announcing the new partnership, Coinbase said it would allow users in the US to exchange US dollars for bitcoin, and will be providing customer support to customers in the region.
It also said it will begin to accept foreign-trading options from FXCM partners, including BTC-e, and allow customers in countries that do not allow cryptocurrency-based currencies to trade in USD to use bitcoin.
Bitcoin users can exchange their bitcoin for USD, or vice versa.
“As a cryptocurrency-only exchange, Coinbase is able to facilitate bitcoin purchases on foreign exchanges,” the company said.
“This enables us to offer a better experience for our users and to improve our reputation.”
The Coinbase partnership follows recent moves by US regulators to crack down on money laundering through cryptocurrency platforms and bitcoin exchanges.
Last month, the US Securities and Exchange Commission (SEC) warned that cryptocurrency-focused exchanges like Coinbase were “likely to create an incentive for individuals who have been convicted of money laundering to seek to hide their illegal activities”.
The SEC also said in a separate report that it was investigating Coinbase, BitInstant, and other cryptocurrency-related companies for possible violations of US money laundering laws.
The US Treasury Department is also conducting a wide-ranging review of the online-money-laundering rules and has proposed new guidelines for financial institutions, including Coinbase, that would allow them to “assess and mitigate the risk of money-launderings on the platform”.
A Coinbase spokesperson said the company would “review the proposed regulations and provide any updates as soon as we are able”.
“We will continue to work with regulators to make the online platform work as we have intended,” he said.
The company has so-called “smart contracts” that allow its users to create accounts and set up virtual wallets, with Coinbase also adding “smart wallet” features to its platform to make it easier for customers to transfer bitcoins.
The Coinbase team said the “smart contract” feature was part of a broader “transaction layer” feature that would be used by other Coinbase users to transfer bitcoin.