The Financial Conduct Authority imposed a financial penalty of £3,503,546 on CB Payments Limited in a Final Notice dated 23 July 2024 and published on 25 July 2024, marking the first enforcement action the regulator has ever taken against a cryptoasset firm under the Electronic Money Regulations. CB Payments Limited is a United Kingdom e-money institution and a subsidiary of Coinbase, the US-listed cryptocurrency exchange, and the fine relates to serious breaches of a voluntary requirement that prohibited the firm from onboarding high-risk customers.
The penalty would have been higher but for a 30% discount applied by the FCA in recognition of CB Payments' decision to settle at an early stage of the enforcement process. The firm did not contest the FCA's findings.
FIRM SERVED THOUSANDS OF PROHIBITED HIGH-RISK CUSTOMERS
The FCA found that despite a Voluntary Requirement, known as a VREQ, that explicitly prohibited CB Payments from providing services to high-risk customers, the firm went on to onboard and service 13,416 such individuals between October 2020 and October 2023. The existence of a VREQ, an agreement entered into voluntarily by the firm with the regulator, made the breach particularly serious in the FCA's view, as it represented a failure to honour a commitment the firm itself had accepted.
Of the 13,416 high-risk customers who received services in breach of the requirement, approximately 31% made deposits into their accounts. Those customers deposited a total of approximately $24.9 million, funds which were subsequently used to execute approximately $226 million in cryptoasset transactions through other entities within the broader Coinbase Group.
CB Payments has been operating within the UK's e-money regulatory framework, providing services that facilitate access to the broader Coinbase ecosystem for customers in Great Britain.
Bank news that matters, every weekday.
Follow The Global Banker on LinkedIn