The leading digital assets exchange Coinbase has been slapped with a hefty $3.3 million fine by the Dutch central bank, De Nederlandsche Bank (DNB). A fine of an identical amount was paid a few months earlier by its rival platform Binance.
According to the DNB's press release, the fine was imposed due to unauthorized crypto activities at the Coinbase exchange, from November 2020 until at least 24 August 2022.
Coinbase Europe Limited Fined by DNB
The Coinbase European subsidiary, Coinbase Europe Limited, has been operating unregistered in the Netherlands since at least November 2020. Earlier in May of the same year, the DNB imposed a registration requirement on all cryptocurrency service providers due to the high risk of money laundering and terrorist financing.
The base fine for a violation committed by Coinbase is €2 million, but it was increased due to the fact that Coinbase is one of the largest cryptocurrency exchanges in the world and has a large number of consumers in the Netherlands.
"In addition, Coinbase has enjoyed a competitive advantage in that it has not paid any supervisory fees to DNB or incurred other costs in connection with DNB's regular supervision activities. A further important reason for the increased fine is that the non-compliance persisted over a prolonged period," DNB stated.
The decision to impose the fine was made on 18 January, but the official announcement was not released to the media until 26 January.
DNB imposes administrative fine on Coinbase Europe Limited for providing crypto services without the legally required registration until 22 September 2022. https://t.co/wEjAez6GDs pic.twitter.com/cDzXxKRqq4
— De Nederlandsche Bank (@DNB_NL) January 26, 2023
Binance Paid a Similar Fine in July
The Dutch regulator imposed an identical fine on Binance last July. Binance was required to pay a penalty of €3.3 million for offering local investors access to cryptocurrency services without proper regulation.
DNB's explanation at the time was very similar: Binance is a large exchange with a sizable customer base, which used a competitive advantage in failing to comply with local regulations. The Dutch regulator pointed to the anonymity of cryptocurrencies, which can become a tool for money laundering without proper oversight.
"The registration requirement for crypto service providers was introduced on 21 May 2020 because of the high risk of money laundering and terrorist financing associated with crypto services. This is related to the anonymity associated with crypto transactions. The registration requirement enables DNB to monitor the risk of illicit financial flows more effectively," the regulator explained.
Almost a year earlier, the DNB had issued a public warning against Binance for unauthorized activity. Several other regulators have published similar notices.
Watch the recent FMLS 2022 Executive Interview with Lory Kehoe, the Director of EMEA Business Development at Coinbase.
Coinbase Faces Crypto Winter Troubles
The fine imposed on Coinbase adds to the recent problems the platform has faced. At a time when rival Binance is increasing its headcount, Coinbase has decided to shed its workforce in the face of a prolonged cryptocurrency winter.
Due to the staff cuts, the platform has decided to suspend its operations in the Japanese market. All local customers must withdraw their funds and transfer them to another platform until 16 February 2023.
"Due to market conditions, our company has made the difficult decision to halt operations in Japan and to conduct a complete review of our business in the country. However, we are committed to making this transition as smooth as possible for our valued customers," Coinbase wrote in a blog post.
Many other cryptocurrency exchanges have reported job cuts in the period. Luno announced a similar decision this week, reducing its workforce by 35%. Earlier, a potential reduction was announced by Crypto.com, looking to lay off up to 20% of current employees.
