Coinbase Ordered to Fix Organizational Deficiencies
- Coinbase Germany was granted a license to provide crypto custody services in Germany in 2021.
- Regulators in Germany are alarmed by the recent failures of top crypto platforms.
- Officials from Coinbase Germany have confirmed their cooperation with the German regulator.
Germany’s financial watchdog, the Federal Financial Supervisory Authority, known as BaFin, recently conducted an audit on Coinbase’s local unit and said it uncovered “organizational deficiencies.” According to a statement from the agency, Coinbase Germany was ordered to ensure adequate risk management and internal control following the latest discovery.
BaFin accused Coinbase Germany of violating standards set by the German Banking Act. The financial regulator cited Section 25a (1) of the Act, which outlined the requirements for firms to maintain proper staffing, risk-bearing capacity, emergency management systems, etc.
The requirement also specified that Coinbase Germany ought to have “suitable arrangements for managing, monitoring and controlling risks and appropriate arrangements by means of which the institution’s financial situation can be gauged with sufficient accuracy at all times.” BaFin granted Coinbase Germany permission to offer crypto custody services last year.
Regulators are paying more attention to cryptocurrency businesses globally following a difficult year that saw some well-known names in the sector fail, partially due to subpar risk-management techniques. Countries like Germany and Singapore, which have extensive crypto regulatory frameworks, are keeping a closer eye on service providers.
BaFin said the order to address organizational concerns has been in place since October 27. The statement said,
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.
In addition to internal controls, BaFin discovered that Coinbase Germany lacked adequate and effective risk management for situations where the firm outsourced transactions or services that it usually handles. As a result, BaFin recommended that Coinbase maintain an outsourcing registry as part of its risk management.