Coinbase to pay $100 million settlement with New York regulators
Misty Severi
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Cryptocurrency company Coinbase will be required to pay $100 million to New York regulators after an investigation revealed the company was “vulnerable to serious criminal conduct,” the Department of Financial Services said Wednesday.
Coinbase “failed to conduct due diligence” within its Bank Secrecy Act and Anti-Money Laundering program, according to the department’s press release, including failing to keep ahead of the alerts triggered by its Transaction Monitoring System.
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One-half of the settlement is a $50 million penalty for violating the state’s virtual currency, money transmitter, transaction monitoring, and cybersecurity regulations, according to New York Superintendent of Financial Services Adrienne Harris. The other half is an investment by the company into its compliance policy over the next two years.
“It is critical that all financial institutions safeguard their systems from bad actors,” Harris said in the press release. “Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth. That failure exposed the Coinbase platform to potential criminal activity requiring the department to take immediate action, including the installation of an independent monitor.”
Harris said that some of the crimes Coinbase became vulnerable to included fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking.
In light of the findings, Coinbase will be required to keep its independent monitor for an additional year, which could be extended further if the state financial services department determines it’s still necessary. Coinbase has already begun to remediate many of the other issues outlined in the investigation, the release said.
Coinbase said it views the settlement as a “critical step” in its efforts to improve its platform. Coinbase was one of several cryptocurrency exchanges that gained popularity during the COVID-19 pandemic.
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“We believe that New York — and the broader [crypto] industry — needs more players committed to compliance and working with regulators,” Coinbase said in a statement on its website. “That is one of the reasons why we knew it was important to bring this matter to a conclusion, even though it is never the type of agreement reached lightly.”
The platform added that it still takes its place as a role model and leader in the crypto industry seriously and that customers should feel “safe and protected” when using its services, despite the findings.