Coinbase to Manage Seized Digital Assets for U.S. Marshals Service

TLDR

• The U.S. Marshals Service (USMS) has chosen Coinbase Prime for a $32.5 million contract to custody and trade digital assets.
• Coinbase Prime will provide custody and advanced trading services for large-cap digital assets seized by the USMS.
• The USMS has previously faced challenges in managing and tracking cryptocurrency.
• This contract comes while Coinbase is involved in legal battles with the SEC and other federal agencies.
• Coinbase has a history of working with law enforcement to handle seized crypto assets.

The U.S. Marshals Service (USMS), a key law enforcement arm of the federal courts, has entered into a contract with Coinbase. The deal, worth $32.5 million, tasks Coinbase Prime, the company’s institutional investing branch, with providing custody and advanced trading services for large-cap digital assets.

This partnership comes at a time when the USMS has been seeking better ways to handle cryptocurrency. In 2022, an audit by the Office of the Inspector General for the Justice Department found that the Marshals Service struggled with managing and tracking digital assets. The new contract with Coinbase aims to address these challenges.

The USMS, which operates under the Department of Justice, is responsible for managing and disposing of assets seized in criminal investigations.

With the rise of cryptocurrency use in both legal and illegal activities, the agency has increasingly found itself dealing with digital assets. The contract with Coinbase is designed to “streamline custody, management, and disposal processes for cryptocurrency assets,” according to the USMS.

Coinbase was chosen after a competitive selection process. The company states that its “strong track record and ability to securely provide institutional-grade crypto services at scale” were key factors in winning the contract. This isn’t Coinbase’s first rodeo with law enforcement; the exchange has previously assisted agencies in custodying or selling crypto seized during criminal investigations.

The scope of the contract is broad. Coinbase Prime will not only store the digital assets but also provide “advanced trading services.”

This suggests that the USMS may use Coinbase’s platform to sell seized cryptocurrencies when necessary. The focus appears to be on “large-cap digital assets,” which likely includes well-known cryptocurrencies like Bitcoin and Ethereum.

The timing of this deal is interesting, given Coinbase’s current legal battles. The company is involved in a civil lawsuit with the U.S. Securities and Exchange Commission (SEC), filed in June 2023. The SEC has accused Coinbase of operating without proper registration. In response, Coinbase has been pushing back against what it sees as regulatory overreach.

Just last week, Coinbase filed its own lawsuits against the SEC and the Federal Deposit Insurance Corporation (FDIC). These suits allege that the agencies failed to comply with Freedom of Information Act requests. Coinbase has also accused federal financial regulators of trying to cut off the crypto industry from the banking sector.

Despite these ongoing legal challenges, the USMS contract suggests that other parts of the federal government see value in working with established crypto companies. This contract may provide Coinbase with a boost to its institutional credibility at a crucial time.