Coinbase CEO says unnecessary account restrictions has reduced by 82%

Brian Armstrong, CEO of Coinbase, said in an X post on Friday that the platform has reduced the issue of unnecessary account freezes and restrictions by 82% so far. Noting that unnecessary account freezing has been a “major issue” for Coinbase users “for longer than is acceptable,” he wrote:

“I could list a bunch of the underlying reasons why it [account restrictions] got so bad in the first place, but what’s more important is that we’ve made it a priority to fix, and we have been making good progress.”

Armstrong added that the exchange will continue to make improvements, announcing them as they are rolled out.

Steps taken by Coinbase to reduce account freezes

Armstrong’s claims came as a response to a post by Dor Levi, founder of smIXL, a real-time blockchain data simulation and analysis firm acquired by Dune Analytics last year. Levi, who is now part of the team working to fix Coinbase’s issue of account restrictions, detailed the steps taken by the exchange to address the issue.

Levi stated that he joined Coinbase with the sole purpose of helping fix the platform’s issue with account restrictions. He noted that the goal is to ensure that account freezes are “rare.” Restrictions on accounts should be limited to circumstances that necessitate them, such as legal obligations to adhere to sanctions or court orders, or to protect customers from scams and account compromises, he added.

Levi wrote:

“We’re committed to getting this right. Recent releases have enabled us to make huge improvements without sacrificing our legal and regulatory obligations, or our commitment to safety.”

He also listed certain measures that Coinbase has adopted to reduce account restrictions. This includes “significant investments” in machine learning (ML) models, infrastructure, modeling, and teams. These investments have helped improve the “precision and recall” of Coinbase’s models, resulting in fewer restrictions and freezes, Levi said.

The exchange is also moving processes like source-of-funds verification and enhanced know-your-customer (KYC) validation into the Coinbase app to speed up the process of removing restrictions. Levi wrote:

“This [moving processes into the app] means most restriction types will have self-service flows to remove restrictions, which is much more efficient than previous options.”

He added that the exchange has also established guardrails to ensure that reducing account freezes remains a primary focus.

Coinbase users have long complained about account freezes

For years, Coinbase was the second-largest crypto exchange by trading volume, second only to Binance, until Bybit bumped it in March 2024. Despite the considerable trading volume it handles each day, Coinbase users have long complained about inexplicable or unnecessary account freezes for prolonged periods.

In December 2024, EthHub co-founder Eric Conner took to X to complain that his Coinbase account was locked while trying to execute a transaction. Connor noted that the freeze was purportedly implemented because he used a virtual private network (VPN) to access his account.

Following Connor’s post, a barrage of similar complaints flowed in, sparking a social media backlash. Some users reported being locked out of their accounts for months or even years.

Coinbase product director Scott Shapiro explained at the time that the exchange’s risk models automatically flag access through VPNs, which are always used by miscreants. While some, like Blockworks co-founder Jason Yanowitz, supported Coinbase’s effort to protect users, Connor called it a “lazy implementation.”

The problem of frozen accounts persists, despite Coinbase’s efforts to fix it. In fact, a user replied to Levi’s post on Friday, stating that his account has been frozen for a week, after he tried to send $10 worth of crypto to a new account. The user, who noted that he has been a Coinbase customer for 10 years, said that the account restrictions were applied to all his assets, not just the ones he tried to use.