The UK Financial Conduct Authority (FCA) fined Coinbase £3.5 million (about $4.5 million) for breaking rules meant to limit services to high-risk customers. Coinbase is a well-known bitcoin exchange in the US. The FCA’s decision is a major regulatory move against the company that shows it has problems with following the rules.
According to the FCA’s press release, CB Payments Limited (CBPL), a major part of the Coinbase Group, broke a voluntary deal with the regulator several times. The goal of this deal was to stop CBPL from taking on high-risk customers. Even so, CBPL went ahead and signed up and started serving over 13,400 high-risk customers, which was clearly against what they agreed to. A study by the FCA found that more than 30% of these high-risk buyers put in almost $25 million.
“These funds were used to make withdrawals and execute crypto transactions via other Coinbase entities, totaling approximately $226 million.”
The FCA
Regulatory Scrutiny and Impact
The regulator said that the breaches happened because CBPL did not manage its compliance controls with enough care and attention. The FCA told Coinbase that these controls were not designed, tested, put in place, or monitored with “due skill, care, and diligence.” The lack of control was especially troubling because it went on for almost two years without being noticed, letting the breaches happen without being fixed.
Coinbase hasn’t said anything about the fine in public yet. But the FCA said that because the company helped with the probe, it was eligible for a 30% discount on the fine, which meant that less money had to be paid. Even though the FCA said the issue was fixed, the market has still been reacting. Coinbase’s share price dropped almost 5% after the news came out. This was because investors were afraid that the fine would hurt the company’s image and profits.
The fine is evidence that bitcoin exchanges continue to receive a lot of attention. Governments are doing more to make sure they follow the law and protect banking systems. Regulators set rules that crypto platforms don’t always follow. This is especially true when it comes to taking care of high-risk customer accounts. The FCA’s moves against Coinbase show this to be true.
Because the bitcoin market changes so quickly, we need strong ways to make sure people follow the rules. Following strict rules and being open about how they run their businesses is now even more important for all financial firms, even crypto firms. This is because the FCA has made its decision.
Investors and the government need to see proof that Coinbase has fixed the problems the FCA pointed out and improved the way it follows the law before they will trust it again. The outcome of this case could also change what people can expect from the coin market in the future.
