The bitcoin wallet platform Coinbase has now enabled instant bitcoin purchases. Users will have to undergo identity verification, which will unlock instant transfer and larger transaction limits. Coinbase is still limited to the US only, but this move brings it into closer competition with the BitInstant exchange.
Coinbase imposes transaction limits via so-called user levels. Level 2 accounts have the highest transaction limits. However, as a part of the new instant transfer facility, Coinbase says it has set all users at level 1, and it will require identity verification before anyone can return to level 2 status.
According to comments by a Coinbase representative on Reddit, there are two steps required for verification:
To become level 2 you need to do two things:
1) Make a purchase at level 1, and wait 30 days
2) Complete ID verification, which takes less than 5 minutes
In the ensuing Reddit thread, it was established that no physical ID was required to be submitted. This in turn means that Coinbase would be checking a user's information against their public credit record. Users who had little or no credit rating raised concerns as to whether they would be able to be verified or not. At the time of writing, the Coinbase representative had not responded to those queries, and so the question remains unanswered.
Reddit users who had already gone through Coinbase's identity verification reported that it was a quick process, and at least in case the process was completed in "less than a minute".
There are other worries that the requirement for identity verification compromises the anonymity offered by bitcoin. While this is true, it is a trade off with the added convenience of being able to buy and sell bitcoin instantly.
Previously, BitInstant had been the market of choice for instant transfers. However, Coinbase's ease of use and added instant transfers may make it a more desirable option for customers. Perhaps the biggest problem for Coinbase, though, is that it only operates in the US, whereas BitInstant operates in several countries.