In a significant development, the US Department of Justice’s asset forfeiture division, the US Marshal Service, has chosen Coinbase as its custody provider for large-cap digital assets.

Coinbase announced the partnership in a recent blog post, highlighting the agency’s selection of Coinbase Prime to offer custody and advanced trading services for its “Class 1” digital assets managed centrally in support of federal law enforcement efforts.

Coinbase Secures Government Partnership

The US Marshal Service conducted a thorough due diligence process, considering various solutions, and ultimately opted for Coinbase based on its track record and ability to securely provide institutional-grade crypto services at scale.

The agency stated that it requires reliable storage and liquidation techniques to professionally manage and dispose of substantial quantities of popular cryptocurrency assets, known as Class 1 cryptocurrencies, in a manner consistent with policies outlined by the Department of Justice and the US Marshal Service.

This partnership will reportedly streamline the custody, management, and disposal processes for cryptocurrency assets, allowing for diversification in the types of digital assets that can be handled and disposed of under the government’s forfeiture programs.

Coinbase emphasized its longstanding history of supporting law enforcement agencies and its collaborations with major federal, state, and local agencies in the US, as well as international agencies worldwide. The exchange wrote:

Today, Coinbase works with every major U.S. federal, state, and local law enforcement agency, as well as international agencies on every continent. Growing the cryptoeconomy means promoting safe and efficient markets, and these partnerships are critical to our mission.

Regulatory Contradiction Exposed?

While Coinbase’s selection by the US Marshal Service demonstrates its ability to serve government entities, the exchange has faced regulatory scrutiny from agencies like the US Securities and Exchange Commission (SEC).

Despite this, the US government recently transferred over 3,940 BTC worth $241 million to Coinbase, which was originally seized from drug dealer Banmeet Singh during a trial in January 2024.

Pro-crypto lawyer John E. Deaton criticized the US government’s actions, labeling them as “nonsensical.” Deaton specifically called out SEC Chairman Gary Gensler and US Senator Elizabeth Warren, noting that Gensler continues to work under Warren’s administration while supposedly joining the anti-crypto movement she had pledged to create upon her reelection announcement.

Deaton highlighted the irony of the US government utilizing Coinbase for Bitcoin transfers while the exchange itself faces accusations of alleged unlawful business activities by the SEC and its chair Gary Gensler.

Deaton pointed out the contradiction of Gensler, as SEC Chairman, declaring Coinbase’s business as illegal, yet the US government relying on the same “illegal” business to sell Bitcoin to the American public.

Ultimately, the situation raises questions about the consistency and coherence of the government’s approach to cryptocurrencies, especially regarding Coinbase’s involvement in official transactions despite ongoing regulatory challenges.

The incident underscores the need for clarity and alignment between regulatory bodies and government agencies to create a more predictable and supportive environment for the crypto industry.