Coinbase Abruptly Freezes ZCash Transactions

Coinbase quietly entered its fourth day of a ZCash (ZEC) lockdown on Sunday, a sign of lingering dysfunction on the platform after the token upgraded earlier in the week.

The privacy coin’s “Halo Arc” upgrade on Tuesday included a feature enabling private transactions to take place by default. (Previously, users were required to activate that setting.) But the upgrade also inadvertently caused problems for a number of wallets that hold ZEC, causing them to display incorrect balances and, in some cases, preventing users from sending or receiving their funds. ZecWallet Lite had yet to regain functionality as of Sunday, though a majority of wallets — including YWallet and Nighthawk — had resumed working normally.

However, Coinbase maintained its unannounced freeze on depositing and withdrawing the token. Users who have attempted to move their ZEC to or from the platform have seen their funds unexpectedly frozen — without warning — since June 1. The company has declined to address the issue beyond a “service announcement” acknowledging ZEC “sends and receives” were “paused,” adding, “We are currently investigating this issue.”

Puzzlingly, according to users who spoke with Goblin Crypto, Coinbase support representatives were providing different answers about the situation to different customers, with some being informed about the outage, while others were told that Coinbase staff would look into their issue.

A review of the company’s Twitter account appeared to corroborate those claims. “Our teams are working to upgrade the network,” Coinbase’s support account wrote on Saturday in response to a customer who inquired about the whereabouts of their missing funds. “The asset will be available again once the upgrade is completed.”

“ZEC sends/receives have been paused while we investigate the cause of external issues,” the company replied to another user.

An hour later, Coinbase replied to a third user without any reference to the allegedly site-wide freeze. “Do you have a case# or Email that you can DM us to investigate further? If not, can you please make a case … so we can look into your issue further.”

Hey BackDoorCreep, Apologies for your transaction issue! Do you have a case# or Email that you can DM us to investigate further? If not, can you please make a case here, so we can look into your issue further:https://t.co/uf0HdOkgyN

^MC https://t.co/lVqd7e12Qg

— Coinbase Support (@CoinbaseSupport) June 4, 2022

Good of you to mention this, @Sawek40371341. ZEC sends/receives have been paused while we investigate the cause of external issues. You may sign up for updates if you’d like: https://t.co/mW4zzTb0Mr
^KB

— Coinbase Support (@CoinbaseSupport) June 4, 2022

ZCash was created in a 2016 as a cryptocurrency that offered users the option of using privacy-enhancing measures to obscure their transactions. Former NSA contractor and whistleblower Edward Snowden revealed in April that he was one of six participants in the ceremony entrusted with a piece of ZEC’s cryptographic key, all six of which were needed for controlling the currency. Those six individuals were tasked with destroying their respective keys after the ceremony took place.

Another benefit of Tuesday’s upgrade was elimination of the need for similar “trusted setups” to take place before future hard forks of the network.

I doubt the exchanges would have integrated with ZCash otherwise. Monero still isn’t listed on Coinbase or Gemini and I doubt it ever will be.

— Xan Nick (@xan_nick) June 3, 2022

Privacy advocates have long been critical of ZEC for failing to enable privacy by default, and for providing other measures that allow dedicated snoops to track transactions. But as users pondered Coinbase’s alleged inability to accommodate the latest upgrade, observers pointed out that centralized exchanges would have been unlikely to list ZEC from the start had its privacy measures been stricter.

Coinbase has been struggling with more than one token this week. It similarly disabled Solana transactions on June 1 amid that network’s most recent outage. Transactions for that currency were reenabled the next day, 21 hours later.

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