The UK arm of Coinbase, one of the world’s largest Bitcoin exchanges, has been fined £3.5 million by the financial regulator FCA for recruiting high-risk customers to its platform. This development is considered as an indication that regulatory authorities are tightening their controls in parallel with the rapid growth of the cryptocurrency industry.
Penalty from England to Bitcoin exchange Coinbase
Coinbase, the giant of the cryptocurrency world, failed an important test in England. The Financial Conduct Authority (FCA) found that Coinbase’s UK arm breached an agreement not to include high-risk customers on its platform. This situation dealt a major blow to the company’s reputation and sparked debates about the regulation of the cryptocurrency industry. CB Payments Limited (CBPL), the UK arm of Coinbase, one of the world’s leading cryptocurrency exchanges, faced a fine of 3.5 million pounds (approximately $4.5 million) by the financial regulator FCA.
The FCA said in a statement today that CBPL had breached a voluntary agreement not to include high-risk customers on its platform. The regulator stated that it found serious weaknesses in the company’s control mechanisms. Coinbase’s UK unit CBPL signed an agreement with the FCA in October 2020, stipulating that it would not accept new customers identified as “high risk”. However, the FCA found that CBPL included 13,416 high-risk customers on its platform despite this agreement.
Statement from FCA
The FCA’s Enforcement Director, Therese Chambers, hit out at the shortcomings in CBPL’s control mechanisms. “There were major weaknesses in CBPL’s controls and the FCA had previously pointed this out. Despite this, CBPL repeatedly breached these terms,” Chambers said. Stating that this situation increases the risk of criminal activities such as money laundering, FCA imposed a penalty of £ 3.5 million on CBPL. Coinbase announced that it accepted the FCA’s findings and reiterated its commitment to comply with the regulations. The company stated that some high-risk customers were “unintentionally” included in the system and that these customers accounted for only 0.34 percent of the total new customers.
However, this development negatively affected Coinbase’s stock. The company’s stock is trading at $240.31 in the US today, down 1.94 percent. FCA announced that it wanted to send a message to other financial institutions with this penalty that it will not tolerate negligent behavior that threatens the integrity of financial markets. This development, which occurred at a time when the cryptocurrency industry is growing rapidly and regulatory authorities are tightening their controls in this field, is considered an important indicator for the future of the industry.
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