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Dutch Central Bank hits Coinbase with a 3.3 million euro fine for failure to register

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(Kitco News) - Coinbase, the second largest crypto exchange by volume in the world, has been fined 3.3 million euros ($3.6 million) by the Dutch Central Bank for not being in compliance with local regulations and offering crypto services to customers in the country without registration.

“The fine was imposed because Coinbase provided crypto services in the Netherlands in the past without registration with DNB, which is in non-compliance with the law,” the De Nederlandsche Bank (DNB) announcement said.

All companies looking to offer crypto services in the Netherlands are required to first register with DNB under the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act.

Coinbase is being hit with a “category 3 fine,” which carries a base amount of €2 million. That figure was increased “due to the severity and degree of culpability of the non-compliance.”

DNB handed down the €3,325,000 fine for several reasons, including the fact that “Coinbase has a significant number of customers in the Netherlands that make use of its crypto services.”

On top of the fact the exchange is one of the largest crypto service providers globally, DNB also increased the fine because “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,” the central bank said.

The non-compliance from Coinbase was considered to be “very severe” by DNB since it persisted from Nov. 15, 2020, until “at least” Aug. 24, 2022, which was the end date of DNB’s examination.

DNB reduced the fine by 5% because Coinbase “had always intended to obtain registration with the DNB.” The exchange acquired its registration on Sept. 22, 2022.

The Netherlands first introduced the registration requirement for crypto service providers on May 21, 2020, “due to the high risk of money laundering and terrorist financing associated with crypto services.” The registration requirement enables DNB to monitor the risk of illicit financial flows more effectively.

By failing to obtain registration in a timely manner, Coinbase was unable to report any unusual transactions to the Financial Intelligence Unit-Netherlands prior to the date it acquired its registration. “As a result, a large number of unusual transactions may have gone unnoticed by the investigative authorities during this period,” DNB said.

Coinbase cuts staff by 20%, operating expenses by 25%

In a response from Coinbase shared with Kitco Crypto, the exchange disagreed with the enforcement order and is "carefully considering the objections and appeals process." If the company wants to issue an objection, it must do so by March 2.

According to the exchange, the order "is based on the time it took for Coinbase to obtain our registration in the Netherlands,” a period that lasted two years, “and includes no criticism of our actual services.”

“Coinbase is committed to compliance in all jurisdictions in which it operates and will continue to provide safe, trusted services to new and existing Dutch customers,” the spokesperson said. “We have engaged extensively with DNB and are proud to be the first major global crypto exchange to successfully register with them as a Crypto Service Provider. We should not be penalized for playing by the rules and engaging in this process."

As for why DNB is taking this action now, Fergal Parkinson, Director of TMT Analysis, suggested that it comes at a time when “Concerns over regulation and security appear to be the major factors preventing potential investors from fully embracing crypto.” In Parkinson’s view, changing consumer perceptions “is the single biggest barrier to crypto mass adoption.”

“In addition to obtaining the correct registration, exchanges and providers need to ensure that they implement more stringent security and anti-fraud processes in order to attract investors and allow crypto to fulfill its potential as a truly viable, global alternative to the current monetary system,” he said. “This is vital to give people the confidence to make an investment and continue to grow the market.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.