New York Regulators Give Coinbase $50 Million Fine

Buyers still cautious of digital coins as Coinbase is the most recently fined exchange.

January 6, 2023
New York Regulators Give Coinbase $50 Million Fine
Matt Crabtree

Written By

Matt Crabtree

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Bitcoin/U.S.-Dollar has been consolidating around the $17,000 mark (£14k), and the king coin hasn't been able to close above the 9-day or 21-day moving averages, suggesting that buyers are still struggling to get traction. After showing an initial upward trend during the current banking recession, Bitcoin's (BTC) price reversed and fell to a daily low of $16,778 (£13,915). 

This comes as Coinbase is the latest to receive a large fine and $100 million (£81m) settlement. The New York state government and Coinbase Global Inc., located in the United States, reached a settlement of $100m after an investigation into whether or not the cryptocurrency exchange complied with the anti-laundering legislation.

  • Authorities penalised CoinBase $50 million (£41m) saying the exchange let customers sign up for accounts as early as 2018 with inadequate background checks
  • CoinBase should put invest in improving compliance operations as well, to deter would-be criminals from using the platform. For this, currency firm Coinbase must pay $100 million in total to settle background check allegations and improve systems.
  • It was reported in 2018 that Coinbase has compliance issues with the New York DFS. Coinbase has settled a lawsuit by agreeing to tighten its compliance measures in conjunction with an auditing organisation for one year minimum.
  • Coinbase's CLO, Paul Grewal, said that the company has taken significant steps to rectify these previous shortcomings. The corporation, he informed the crowd, would work with authorities to ensure compliance. Binance and FTX have also been subject to significant penalties.

Coinbase Shares Up 5% Despite Publicised Fine

On Wednesday morning, Coinbase saw its stock price rise by over 5%.

Coinbase has been highly responsive to charges. To resolve allegations that it allowed customers to register accounts without proper verification procedures, Coinbase (COIN) has agreed to pay a $50 million fine to the New York State Department of Financial Services (NYDFS).

After an investigation, authorities concluded that the cryptocurrency exchange's practices violated anti-money-laundering rules. Additionally, the settlement calls for Coinbase to spend $50 million on its compliance procedures over the next two years.

While growing rapidly, Coinbase was unable to implement a reliable compliance program, Financial Services Superintendent Adrienne A. Harris said that, as a result, the Department had to move quickly, including the appointment of an Independent Monitor, to prevent illegal activities on the Coinbase platform.

Since 2017, Coinbase has been authorised to run a virtual currency and money transmission company in the Empire State. The New York Department of Financial Services (NYDFS) appointed an independent monitor to work with Coinbase beginning in early 2022 due to the agency's concerns with the company's Know Your Customer (KYC) and transaction monitoring rules.

Coinbase has agreed to have an independent monitor for the next year, with the possibility of an extension at the NYDFS's discretion.

Coinbase's Chief Legal Officer Paul Grewal emailed CoinDesk to announce that the company had reached a settlement with the New York Department of Financial Services over an investigation into the company's compliance practices from the past.

This investigation had been disclosed in Coinbase's 2021 annual 10K filings. To be a pioneer and role model in the crypto field, including engaging with authorities on compliance, “Coinbase has made extensive steps to remedy these prior weaknesses.”

The settlement was first reported in the New York Times. Today, Coinbase is the second-biggest crypto exchange by trade volume. 

Binance Faces Similar Buyer Caution: £2.5B in Withdrawals in Single Day

As things become tighter in Britain and worldwide, and with the BoE's baseline rate hikes, crypto holders and investors are exhibiting volatile caution in response to big events. 

The largest daily withdrawal amount from the crypto giant Binance has been recorded since June, according to statistics compiled by Nansen. This occurred on Tuesday.

With almost $8.78 billion leaving and $5.1 billion flowing into Binance's foreign exchange, the net outflow was around $3.66 billion (£3b). As much as 63% of Binance's portfolio is held in Ethereum, and outflows are substantially bigger relative to other crypto exchanges during the same time, the data solely pertains to ETH and ERC-20 token moves.

Compare that to Coinbase, which experienced a net outflow of around $574 million from its largest exchange and $248 million from its Coinbase Custody platform over the same time period, and you can see that Binance's weekly outflow of $3.66 billion is staggering. A net outflow of nearly $38.7 million was seen by Binance US throughout the same time period.

Binance Says Withdrawals are Just ‘Market Behaviour’

Binance's CEO claims unusual altcoin trading was just “Market Behavior”.

According to Nansen, Web3 investment business Jump Crypto is one of the firms that withdrew assets from Binance. Last week, Jump withdrew almost $123.4 million in Ethereum from Binance, while this week they removed around $18.4 million.

Binance is experiencing a significant amount of withdrawals, although it still has over $58.9B (£49B) worth of assets at present, the majority of which are in Binance's stablecoin BUSD, Bitcoin, Ethereum, and stablecoin Tether.

In only the last eight hours, Binance's whole portfolio has plummeted by $3.6 billion, as tracked by Nansen's portfolio tracker.

According to CoinGecko statistics, Binance's exchange token, BNB, which is the fourth-biggest crypto by market cap, is down around 2% in the previous day and fell 8% in the past fortnight. This is the case despite the fact that both Ethereum and Bitcoin have had price increases of 12% and 9%, respectively, during the previous two weeks.

Binance CEO Changpeng “CZ” Zhao responded to the news of withdrawals by saying “business as usual”.

“Today, there were withdrawals,” Zhao said. To alternately “stress test withdrawals” on all CEXs is a great idea, in my opinion.

Zhao announced the temporary suspension of USDC withdrawals on Binance US early on that Tuesday morning, citing a token swap problem in which the exchange was unable to convert money owing to the closure of a New York bank that provided liquidity for the swap. After a little pause, the withdrawals have picked back up again.

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