Coinbase Crossed The Line

The Financial Conduct Authority (FCA) has fined CB Payments Limited (CBPL), the UK subsidiary of Coinbase, $4.5 million.

The penalty stems from CBPL breaking a voluntary agreement designed to prevent the onboarding of high-risk customers. This agreement was implemented to curb potential criminal activity on the platform, thereby preserving market integrity and reducing money laundering concerns.

In October 2020, CBPL signed an agreement with the FCA to limit the onboarding of new clients deemed high-risk by the regulator. Despite these safeguards, the FCA discovered that CBPL had violated the deal, onboarding and servicing 13,416 high-risk clients.

Therese Chambers, the FCA's joint executive director of enforcement and market monitoring, criticized CBPL's management for their significant lack of control.

"CBPL's controls had significant flaws," Chambers said, "which the FCA had already noted and which led to the FCA implementing these requirements." Yet, CBPL repeatedly broke these rules.

According to the FCA's investigation, these compliance shortcomings increased CBPL's risk of criminal activity, including money laundering. As a result, the FCA imposed a fine as part of its zero-tolerance approach to regulatory violations that endanger market integrity.

Impact On Shares

The penalty has had an immediate impact on Coinbase's stock. Following the news, the company's shares saw a nearly 2% decline. During premarket trading on Thursday, July 25, the price was recorded at $240.30.

Response Of CBPL

In response to the FCA's findings, Coinbase expressed its commitment to regulatory compliance and acknowledged the infractions. In a statement, Coinbase said that CBPL continuously improves its control systems to meet legal requirements and that the FCA also acknowledged CBPL's cooperation in the investigation.

The exchange noted that only 0.3% of all new clients from October 30, 2020, to October 1, 2023, were high-risk, suggesting that their onboarding was unintentional.

Coinbase emphasized its seriousness regarding the FCA's conclusions and its ongoing efforts to strengthen its control systems to prevent further breaches.

Investors and the crypto market will watch keenly as Coinbase addresses these compliance concerns. The business's ability to maintain its dedication to regulatory standards and enhance its control systems will be closely scrutinized.