Summary of Key Points:
- British financial regulator fines Coinbase $4.5 million for breaching high-risk customer requirements.
- Coinbase operated as a gateway for customers to trade crypto within the group.
- FCA found Coinbase breached agreement by onboarding over 13,400 high-risk customers.
- Regulator attributed breaches to lack of due skill and monitoring controls.
- Coinbase shares plunged nearly 5% post the news of the fine.
Financial Regulator Fines Coinbase for Breaching High-Risk Customer Requirement
The British financial regulator has imposed a £3.5 million fine on Coinbase for repeatedly violating a requirement that prohibited the exchange from serving high-risk customers. This penalty was levied due to Coinbase’s failure to comply with the restrictions set by the Financial Conduct Authority (FCA) regarding customer risk levels.
CB Payments Limited & Coinbase Group Operations Highlighted
Within the Coinbase Group, CB Payments Limited acts as a platform for customers to engage in crypto trading through other group entities. Despite agreeing to restrict onboarding high-risk customers, CBPL onboarded and served over 13,400 such customers, resulting in a breach of the agreement. The FCA estimates that these customers deposited approximately $25 million, with a significant portion of these funds used for crypto transactions totaling around $226 million.
Regulator Attributes Breaches to Coinbase’s Monitoring Inadequacies
The FCA attributed the breaches to CBPL’s lack of care and diligence in designing, testing, implementing, and monitoring compliance controls. It also noted Coinbase’s failure to detect these inadequacies in compliance monitoring for nearly two years. Despite the penalty, Coinbase reaffirmed its commitment to regulatory compliance and stated its willingness to collaborate with regulators for improvement.
