Can Coinbase Regain Customer Trust After Neutrino Backlash?

Coinbase has created quite a furor in the crypto community since they acquired blockchain analytics firm Neutrino.

Neutrino has links to Hacking Team, which said to have aided governments that have committed human rights abuses by selling them spyware. Motherboard reported that the spyware was sold to Kazakhstan, Saudi Arabia and Sudan.

Following the backlash to the news of the acquisition, Coinbase has subsequently cut all ties to Hacking Team, letting go of staff members that previously worked with Hacking Team.

Coinbase co-founder Brian Armstrong attempted an explanation in a blog post titled “Living up to our values” on Monday, saying:

However, we had a gap in our diligence process. While we looked hard at the technology and security of the Neutrino product, we did not properly evaluate everything from the perspective of our mission and values as a crypto company. We took some time to dig further into this over the past week, and together with the Neutrino team have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase.

Some have said that Armstrong’s emphasis on the fact that those hired from Hacking Team have no current affiliation with the group is a weak argument.

A Double Hit to Coinbase’s Reputation

The backlash to the Neutrino acquisition was doubled when a Coinbase spokesperson, Christine Sandler, said in an interview with Cheddar that the exchange’s previous analytics provider was selling client data — news which unsurprisingly exacerbated the scrutiny on Coinbase.

Coinbase subsequently said that Sandler misspoke.

The analytics firm involved, Elliptic, has denied the allegation and said that it was never given any personally identifiable information by Coinbase.

The backlash over this flurry of negative news has been quick and brutal, #deleteCoinbase began trending on Twitter, and the loss of trust has resulted in some users closing their accounts on the exchange.

This is not the first time Coinbase has been put under a microscope.

In a separate issue, Fortune reported in July 2018 that an internal investigation was conducted at Coinbase, after allegations of insider trading on Bitcoin Cash (BCH) surfaced. The investigation concluded that no such activity took place, but such reports pile up and mar the image of a firm in the long run.

There is no doubt there will be increased scrutiny on Coinbase going forward. Whether or not it will actually lose a sizeable number of users because of this Neutrino backlash remains to be seen, and will largely be determined by how Coinbase manages this crisis and regains customer trust. 

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