A Coinbase platform has found itself in choppy regulatory waters in the UK, having been hit with a hefty fine by the Financial Conduct Authority (FCA).
CB Payments Limited (CBPL) serves as a gateway for customers to subsequently trade crypto assets via other Coinbase-operated platforms, but is not registered to trade crypto itself in the UK.
The FCA has fined the firm for violating a key term of the voluntary requirement (VREQ) it signed with the regulator back in 2020. CBPL’s VERQ prevented the company from onboarding high-risk customers until issues in its framework were addressed.
According to the FCA the company breached this on a number of occasions. Coinbase is accused of providing e-money services to 13,416 high-risk customers, of which around 31% deposited around USD$24.9m. These funds were later used for crypto transactions on other Coinbase platforms totalling approximately $226m.
The FCA’s main concern is around money laundering, a worry often raised by regulatory agencies when the topic of cryptocurrency and other digital assets are raised. It has issued the company a £3,503,546 fine.
“The money laundering risks associated with crypto are obvious and firms must take them seriously,” said Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA.
“Firms like CBPL that enable crypto trading need to have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed.
“CPBL, however, repeatedly breached those requirements. This increased the risk that criminals could use CBPL to launder the proceeds of crime. We will not tolerate such laxity, which jeopardises the integrity of our markets.”’
The fine deals a blow to the UK operations of Coinbase, one of the world’s largest crypto exchanges and the largest in its founding market, the US, in terms of volume. The firm is active in several other prominent markets including France and Spain, and its UK team was bolstered with the addition of former Chancellor of the Exchequer, George Osbourne, in February.
Coinbase’s global growth has not been entirely smooth sailing, however. This fine in the UK is not the first time it has faced regulatory difficulty, with the US Securities and Exchange Commission (SEC) clashing with the company for allegedly failing to register as a national securities exchange.