Coinbase’s UK arm was fined $4.5 million by the UK regulator for violating a voluntary agreement related to user participation. CB Payments Limited (CBPL), part of the Coinbase Group, signed a voluntary agreement in 2020 with the UK’s Financial Conduct Authority (FCA) to prevent the onboarding of customers deemed high-risk by the regulator.
Coinbase Faces Penalty Shock
CBPL allegedly onboarded 13,416 customers deemed high-risk by the FCA and provided them with cryptocurrency services, which the agreement prohibited. The UK regulator fined Coinbase Group’s CBPL company £3,503,546 for repeatedly violating the agreement.
According to Therese Chambers, joint executive director of enforcement and market oversight at the FCA, the lack of control increases potential money laundering risks, and she stated on July 25:
“CBPL had significant weaknesses in its controls, and the FCA said so, which is why the requirements were needed. However, CPBL repeatedly breached these requirements. This increased the risk of criminals using CBPL to launder criminal proceeds. We will not tolerate such laxity that jeopardizes the integrity of our markets.”
The UK regulator’s decision could mean more scrutiny for other cryptocurrency exchanges in the region and lead platforms to seek more crypto-friendly regulatory jurisdictions.
The FCA penalized Coinbase’s UK arm under the Electronic Money Regulations 2011. This penalty, particularly concerning for the crypto industry, marks the first instance of the FCA taking enforcement measures based on this law. The regulator also noted that the violations went undetected for the past two years due to the lack of initial monitoring practices related to the voluntary agreement (VREQ).
Details on the Matter
According to a statement shared by Coinbase, only 0.34% of the customers involved with CBPL were deemed high-risk by the UK regulator and were included unintentionally:
“CBPL unintentionally onboarded some customers classified as high-risk under VREQ conditions between October 30, 2020, and October 1, 2023. This led to the FCA’s investigation and subsequent action.”
The statement also noted that the investigation focused on the firm’s e-money issuing services, not crypto asset transactions:
“CBPL has been authorized by the FCA as an e-money institution since 2017 and provides e-money and payment services to customers in certain jurisdictions. As a result, CBPL is not authorized by the FCA to conduct crypto asset transactions for customers, and the FCA’s investigation did not look into any crypto asset transactions.”
