Coinbase Launches KYC-Verified Pools to Enhance Security in DeFi

By: Eva Baxter

Coinbase has introduced a new initiative called Verified Pools, aimed at strengthening security and compliance within the decentralized finance (DeFi) sector. This move marks a significant step for both institutional and retail traders seeking secure and compliant ways to access on-chain liquidity. By launching KYC-verified liquidity pools, Coinbase aims to minimize counterparty risks associated with DeFi transactions while encouraging broader adoption of DeFi platforms.

According to Coinbase CEO Brian Armstrong, Verified Pools will set a new standard for secure on-chain trading by allowing users to trade verified digital assets. This system requires users to undergo Know-Your-Customer (KYC) checks before participating in liquidity pools, offering a validated trust badge for secure trading. Utilizing Coinbase Verifications credential, users can connect their wallets—such as Coinbase Wallet, Prime Onchain Wallet, or compatible third-party wallets—adding a layer of security and trust.

Built on Coinbase's proprietary layer-2 blockchain, Base, the Verified Pools leverage Uniswap v4's advanced smart contract functionalities. This enables optimized liquidity management through a collaboration with Gauntlet, a risk management platform, ensuring a healthy and efficient market. Currently, access to Verified Pools is available in the United States, Singapore, the Netherlands, the British Virgin Islands, the Cayman Islands, and the Channel Islands.

The launch of these pools has come at a time of increasing institutional interest in digital assets. A joint report by Coinbase and EY-Parthenon highlighted an ongoing trend among institutional investors to expand their crypto investments, with many planning to allocate over 5% of their portfolios to digital assets by 2025. While Bitcoin continues to lead the market, there's growing diversification into altcoins like Solana and XRP. The report also underscores the need for greater regulatory clarity to further open up opportunities, particularly in areas like crypto custody. As such, Coinbase's Verified Pools could spur greater institutional confidence and adoption in the DeFi space, potentially setting the stage for a surge in digital asset interest.