The UK Financial Conduct Authority (FCA) announced on Thursday it has fined CB Payments Limited (CBPL), part of the Coinbase group, £3,503,546 ($4.5 million) for repeatedly breaching compliance rules that barred the firm from offering services to high-risk customers. This marks the FCA's first enforcement action against a firm enabling cryptoasset trading.
Violations Over Nearly Two Years
CB Payments Ltd., operating as Coinbase Payments, does not directly handle cryptoasset transactions for customers. Instead, it serves as a gateway for customers to trade cryptoassets through other entities within the Coinbase Group. CBPL is not currently registered to conduct cryptoasset activities in the UK. In October 2020, CBPL agreed to a voluntary requirement with the FCA, barring it from onboarding new high-risk clients until compliance issues were resolved. However, the FCA said that despite these restrictions, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers.
Fund Flows: Nearly $226 Million in Crypto Transactions
The regulator detailed that approximately 31% of these high-risk customers deposited around $24.9 million into CBPL. These funds were then used to make withdrawals and execute multiple crypto asset transactions via other Coinbase Group entities, totaling approximately $226 million. The FCA explained these violations, arising from inadequate control measures, went undetected for nearly two years. Therese Chambers, the FCA's joint executive director of enforcement, stressed the severity of financial crime risks in the crypto sector and the necessity for firms to maintain robust controls.
Industry Implications
This penalty sends a clear regulatory signal that even major crypto firms must comply with anti-money laundering and customer due diligence rules. Coinbase, as the largest US exchange, now faces increased scrutiny over its UK operations. Industry observers expect other crypto payment service providers to reassess their risk management frameworks to avoid similar fines and reputational damage. CBPL has not publicly responded to the fine but is expected to strengthen its compliance measures.