Coinbase Subjected to Heavy Fine in Nederland
On the allegation of doing business without undergoing registration, leading global crypto firm, Coinbase, had been subjected to hefty fines.
As per the information, which is also covered by worldwide media, the fine had been imposed by the Dutch central bank.
De Nederlandsche Bank (DNB), under Dutch law, is authorized to impose fines upon financial institutions as well as crypto entities.
If DNB finds regulatory deficiency on the part of these entities, it can issue subpoenas, conduct inquiries, initial trials and pass rulings.
A regulatory deficiency has recently been identified by DNB in Coinbase Europe Limited i.e. a subsidiary owned and controlled by Coinbase global.
Resultantly, an administrative fine to the tune of more than $3.6 Million has been imposed upon Coinbase on 18th January 2023.
Reasons for Imposition of Fine
As per the press release of DNB, the authority fined Coinbase, particularly with regard to its past operations.
DNB stated in the press release that Coinbase Europe Limited had offered services in the post without undergoing the registration process.
Consequently, DNB arrived at the decision that Coinbase Europe Limited had violated compliance requirements.
Under Dutch law, crypto entities are required to obtain NOCs, registration, and permission from DNB prior to offering their services.
One of the conditions precedents for crypto entities is to seek DNB’s registration under Anti-Money Laundering Policy and Anti-Money Laundering Act. However, in the case of Coinbase, this condition precedent was missing.
Amount of Fine Is Higher Than Usual
DNB stated in the press release that in the normal course, the administrative fine is usually not more than 2 Million Euros.
However, considering the severity of Coinbase’s crime, the amount fine was subsequently increased to 3,325,000 Euros (equivalent to $3.6 Million roughly).
DNB explained that Coinbase is a global brand name in the digital asset industry.
Such a non-responsible act on the part of Coinbase was not expected and, hence, the violation necessitated an exemplary fine, said DNB.
The authority further alleged that the firm had been dealing with millions of local investors and customers. However, to date, the firm hadn’t paid a single penny due to ‘supervisory fees’ charged by DNB.
It has been further alleged by DNB that Coinbase had been carrying on its business in the country since mid-November 2020.
Fine Was Reduced By 5%
It noted further since the inauguration of services in Nederland, Coinbase had been disregarding its compliance responsibility which is a grave crime.
It may be noted that the hefty fine of $3.6 Million to be paid by Coinbase is a reduced fine which was otherwise 5% more.
This reduction was voluntarily made by DNB which appreciated Coinbase, particularly with regard to its commitment to ensuring regulatory compliance.
DNB noted that Coinbase itself came forward and sought registration in 2022 and as a goodwill gesture, the fine was reduced by 5%.
It may further be noted that the registration requirement for crypto firms in Nederland was initially introduced in May 2020.
Since Coinabse came into Nederlands at the end of 2020, it was necessary for Coinbase to obtain registration.
However, Coinbase did not obtain registration and proceeded to offer its crypto trading services in the country. The registration was only sought in November 2022 i.e. after a period of 2 years.
Disadvantages of Non-Registration
There are a number of disadvantages of non-registration. One of the disadvantages is that non-registered crypto firms do not enjoy the privilege offered to them under the law.
For instance, non-registered firms cannot report suspicious transactions to the authorities concerned and hence no legal course can be offered.
DNB’s Financial Intelligence Wing is the relevant department to whom a complaint of suspicious transactions can be forwarded by registered firms.
Secondly, if the department is kept un-informed about such transactions for any reason whatsoever, then the act is considered a ‘punishable offence’.
Though DNB has imposed a fine while utilizing power as a quasi-judicial authority, Coinbase can still file an appeal before an appropriate forum. Rumors suggest that Coinbase has decided to invoke the remedy of appeal.
