Coinbase, a leading cryptocurrency exchange in the United States, has reached a settlement with the New York Department of Financial Services (DFS) for a total of $100 million. Under the settlement, Coinbase will pay a penalty of $50 million, the largest settlement ever reached between a cryptocurrency exchange and a state regulatory agency in the U.S., and spend another $50 million over the next two years to address shortcomings identified by the DFS.
The DFS investigation centered on Coinbase’s compliance with anti-money laundering regulations started in 2018, and the exchange has been cooperating with the regulator since 2021. Nonetheless, the result is a clear message to all cryptocurrency exchanges operating in the U.S. that compliance with regulations is of the utmost importance.
The DFS discovered that Coinbase’s compliance program needed to be improved upon in several key areas. The DFS described the program as “immature” and lacking in depth, stating that it was more of a “check-the-box exercise” rather than a comprehensive and effective system for ensuring compliance with anti-money laundering regulations.
The exchange struggled to conduct proper due diligence on its users and keep up with the platform’s rapid growth in terms of user base. This created an environment in which it was difficult for Coinbase to properly monitor and detect suspicious activity on its platform.
In response to these issues, Coinbase has agreed to implement additional measures to strengthen its compliance program and ensure compliance with all relevant regulations. Despite the significant penalty, Coinbase has stated that it is committed to working with regulatory agencies to ensure the safety and security of its platform for both consumers and authorities.
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