Coinbase CEO Brian Armstrong has hinted that the company's new layer 2 blockchain network Base may be subject to transaction monitoring and anti-money laundering measures at launch.
In a March 6 interview with Joe Weisenthal on Bloomberg Radio, Armstrong acknowledged that Base has some centralized components today, adding that “over time it will become more and more decentralized.” However, he then suggested transaction monitoring and AML requirements for users of the new layer 2 network.
He suggested that Coinbase would take responsibility for early transaction monitoring, adding: “I think centralized players are probably most responsible for avoiding money laundering issues and having transaction monitoring procedures, etc.” Armstrong's comments were also highlighted in a March 7 Twitter thread by decentralization advocate Chris Blec. According to Coinbase, Base is an Ethereum layer 2 network that provides users with a secure, low-cost, developer-friendly way to build decentralized applications.
It was developed with the "OP Stack" used by Optimism, which will enable high-speed transactions on Ethereum. Base was unveiled on February 23rd and is currently in the testnet phase. Coinbase has not yet provided a mainnet launch date, but expects it to be in the second quarter of 2023. Blec previously warned about Coinbase’s latest Layer 2 offering in a blog post published in late February, five days after the company announced Base.
Layer 2 infrastructure is very centralized, he said, because they use "sequencers," which are "nodes that build and execute L2 blocks, while transmitting user actions from L2 to L1."
Coinbase, a licensed money transmitter, will run Base's only sorter. This raises the question of whether Base will also legally require know-your-customer (KYC) requirements, making it the first L2 ever to do so. Coinbase has not confirmed or denied whether Base will implement KYC and AML measures. Blake commented: However, the crypto community and ethereum advocates say Base is a "massive vote of confidence" in ethereum.
