Coinbase Ireland was hit with a 3.25 million-euro ($3.6 million) fine from the country’s central bank over alleged breaches of its safeguarding and outsourcing obligations.
The Irish division of cryptocurrency exchange Coinbase Global failed to establish an adequate outsourcing governance framework, the Central Bank of Ireland (CBI) said on Thursday.
Safeguarding and outsourcing requirements underpin the protection of customer funds. Companies are obliged to keep them adequately funded and monitored and set up procedures to report to the regulator when material changes occur.
“They placed excessive reliance on the U.S.-based Coinbase Group as an outsourced service provider to implement safeguarding processes and controls [and] failed to adequately safeguard customers’ funds, both through inadequate system design and insufficient control testing,” the CBI said.
When crypto-friendly bank Silvergate was on the verge of collapse in 2023, Coinbase instructed 30 customers to deposit funds into an alternate account held by Coinbase at another U.S. bank, the company said in a statement following the CBI’s announcement.
The funds were therefore held alongside those belonging to customers of another Coinbase entity, a breach of safeguarding requirements.
