Coinbase’s upcoming network, Base, will likely feature transaction monitoring

Updated: 07 March 2023

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Coinbase, the largest regulated cryptocurrency exchange in the US, is getting closer to launching its long-anticipated layer-2 network, known as Base. The firm’s CEO, Brian Armstrong, commented on its development and what to expect yesterday, March 6th, stating that Base will likely be regulatory compliant.

According to him, this means that it will feature things such as transaction monitoring and anti-money laundering measures.

Some of the details are still unclear

Armstrong stated that “Base has some centralized components today but it’s going to become more and more decentralized over time as it grows. I think we have responsibilities in terms of transaction monitoring … things like that that we have to look at in the early days.” He also suggested that centralized elements will be necessary in order to avoid money laundering and other illicit activities. However, it remains unclear whether he meant that this would apply to centralized actors that will operate on the network, or to centralized actors, in general.

What is Base? Coinbase Ethereum L2 Explained? pic.twitter.com/2vabCNUWIT

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What is known, however, is that Base will open its doors to all developers. But, it is also worth noting that the exchange’s initial announcement indicated that Base would be a place for Coinbase’s own on-chain products. With the latest statement in mind, it can be presumed that any products that Coinbase brings to the Base network will keep their initial KYC and AML measures.

On the other hand, Coinbase does intend to work on making Base more and more decentralized as time goes by. However, Armstrong did not suggest that regulatory compliance would be reduced as a result.

Base is still in development, with no known mainnet launch date

For the time being, a lot of details remain unclear, which is to be expected, given that the initial announcement that brought the existence of the network to the public is only two weeks old. Coinbase unveiled its Bse project on February 23rd, stating at the time that the exchange intended to build the platform with an existing L2 project for Ethereum — Optimism.

The exchange said that it would join Optimism as a core developer and that it would use OP Stack. Furthermore, it said that Base would work with other L2 networks, compatible L1 blockchains like Solana, and Ethereum itself.

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At the moment, Coinbase’s upcoming network remains in testnet, meaning that developers can access it, but for the time being, it is still not operational in the sense that it can offer actual use cases to public users. Coinbase also did not say when the mainnet could launch, indicating that even the exchange isn’t sure how long it might take to polish the new product.

However, Armstrong did say that Base should increase the Ethereum network’s usability and scalability, and that remains true for all related networks, as well. As a result, the new network could have extremely beneficial consequences, pushing transaction fees down to a cent or possibly less.

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