Coinbase Faces $100 Million Penalty in 2025 Over 2018 Compliance Failures

In 2024, Coinbase Global Inc., a leading U.S.-based cryptocurrency exchange, agreed to a $100 million settlement with New York State financial regulators following an extensive investigation into its anti-money laundering compliance practices.

The New York Department of Financial Services (DFS) imposed a $50 million fine on Coinbase for allowing customers to open accounts without thorough background checks, a lapse that reportedly began as early as 2018. Additionally, Coinbase committed another $50 million to strengthen its compliance systems aimed at preventing illicit activities on its platform.

Key Highlights

• Coinbase must pay a total of $100 million to resolve long-standing compliance deficiencies.
• Regulatory issues uncovered date back to 2018, before Coinbase obtained its New York license in 2017.
• The settlement mandates Coinbase to collaborate with an independent compliance monitor for at least one more year to ensure robust anti-money laundering controls.

Paul Grewal, Coinbase’s Chief Legal Officer, emphasized in a statement, "We have taken significant steps to rectify these past issues and remain dedicated to setting industry standards by working closely with regulators to uphold compliance."

Historical Compliance Issues Traced to 2018

Regulators first identified the compliance shortcomings in 2020, noting that despite Coinbase’s licensing in New York in 2017, its anti-money laundering protocols were insufficient starting in 2018. Adrienne A. Harris, Superintendent of Financial Services for New York, remarked, "These failures necessitated appointing an independent monitor rather than simply settling, reflecting our commitment to holding crypto firms to the same rigorous standards as traditional banks."

As part of the agreement, Coinbase will intensify efforts to review older accounts for suspicious activity and maintain oversight by an independent monitor to enhance compliance procedures. The identity of this monitor remains undisclosed.

Regulatory Agencies Highlight Crypto Risks

Recent months have seen increased scrutiny from federal prosecutors targeting multiple cryptocurrency exchanges, focusing on whether they adequately vet customers' backgrounds. Following the high-profile collapse of FTX, regulators cautioned banks about the inherent risks associated with cryptocurrency assets, including legal uncertainties and potential for misleading disclosures.

Conclusion

The U.S. government continues to investigate major crypto exchanges like Binance for anti-money laundering violations, particularly concerning lax identity verification processes prior to late 2021. Similarly, FTX faced probes for compliance failures before its 2022 collapse, with allegations that former CEO Sam Bankman-Fried orchestrated the misuse of billions in customer funds.

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