Germany's financial market regulator ordered the local unit of Coinbase to ensure "proper business organization" following deficiencies in an annual audit of the crypto firm's financial statements.
Announced on Tuesday, the Federal Financial Supervisory Authority (BaFin) specified that Coinbase's German entity violates the standards set by the German Banking Act. The specific section in violation of the act describes requirements for maintaining risk-bearing capacity, adequate staffing, and emergency management mechanisms.
The Financial Times detailed that audit firm Deloitte provided an unqualified audit opinion to the financials of the German unit of Coinbase. It means the audited numbers were accurate and fair, but with some organizational flaws, which were reported to the regulator.
"An audit of the annual financial statements revealed organizational deficiencies at the institute. The regularity of the business organization was not given in all audited areas," the regulator stated (translated from German).
In a media statement, a Coinbase spokesperson ensured that the company is "cooperating fully" to address the discrepancies found in the audit. "We have developed a remediation plan fully addressing each finding of the audit report to address BaFin's concerns. To date, we have made substantial progress on this plan," the spokesperson added.
A Major Crypto Exchange
Headquartered in California, Coinbase is one of the largest cryptocurrency companies that has expanded globally with its services. It received authorization from Germany's BaFin last year for providing cryptocurrency custody services.
Meanwhile, the slowdown in the cryptocurrency market also impacted the performance of Coinbase. The exchange reported loose of over $1 billion and $545 million in the second and third quarters of the ongoing year, respectively. The company's revenue also plummeted drastically, reaching $576 million in Q3, a decline of over 28 percent from the previous quarter and 53 percent from Q3 2021.
Coinbase further pointed out that the crypto trading activities are moving away from the US exchanges. This market trend might have pushed Coinbase to establish its international bases: it recently received regulatory approval in Singapore and multiple European licenses.
The publicly listed shares of Coinbase took a dent in the current industry turmoil. Coinbase shares closed almost 11 percent lower on Monday and went down by more than 85 percent since its direct listing on Nasdaq last year in April.
With concerns over the impact of vulnerabilities of FTX, Coinbase recently revealed that it only has $15 million worth of deposits on FTX, which is to be acquired by rival Binance.
