Coinbase Fined $100 Million by NY Regulators

Coinbase touts itself as “the most trusted crypto exchange,” but nowadays that’s a little like being the most relatable Kardashian. No one is saying that Coinbase is another FTX, but on Wednesday the company reached a $100 million settlement with…

Griffin Kelly
Photo Credit: Kanchanara/Unsplash
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Coinbase touts itself as “the most trusted crypto exchange,” but nowadays that’s a little like being the most relatable Kardashian.

No one is saying that Coinbase is another FTX, but on Wednesday the company reached a $100 million settlement with New York regulators over questionable practices.

Transparency

Crypto has always been more volatile and riskier than playing the stock game, especially since it lacks a unifying framework for regulation. That volatility hit a nadir in 2022 when crypto exchange FTX imploded because CEO Sam Bankman-Fried allegedly dumped billions worth of customer funds into his failing trading firm Alameda Research. Caught in FTX’s fallout, other crypto groups like BlockFi, Three Arrows Capital, and Celsius Network also filed for bankruptcy last year.

Coinbase, the self-professed good guys of crypto, recently started running ads with the hopes of rebuilding investor confidence by highlighting how much government scrutiny it is now under thanks to being based in the US and not more freewheeling locales like the Bahamas, for instance. Based on New York State Department of Financial Services findings, Coinbase had more than 100,000 alerts of suspicious customer transactions by late 2021. In one instance, the exchange’s lax procedures let a digital thief steal $150 million from an unnamed company the blockchain bandit claimed to work for:

  • The exchange agreed to pay a $50 million fine after regulators found the company was letting customers open accounts without sufficient background checks, which could pave the way for money laundering schemes and terrorist funding operations.
  • Coinbase will also have to spend $50 million to beef up its compliance program – a system to prevent drug traffickers, child pornographers, and other potential criminals from opening accounts.

“We have been very outspoken about illicit financing concerns in the space,” Adrienne Harris, state superintendent of financial services, told The New York Times. ”It is why our framework holds crypto companies to the same standard as for banks.”

What’s in Store for 2023? After the great crypto meltdown of 2022, experts and lawmakers believe the digital currencies will bounce back only under far greater checks and balances, starting this year. Sen. Elizabeth Warren has suggested that crypto oversight could be handled solely by the Securities and Exchange Commission, and Katherine Dowling of Bitwise Asset Management told TechCrunch: “This is not the death of crypto.”

-Griffin Kelly

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