Financial Regulators in New York say that Coinbase is vulnerable to money laundering, drug trafficking and fraud in a public statement pushing the cryptocurrency exchange to strengthen its security.
The New York Department of Financial Services (NYDFS) found that Coinbase had been unsatisfactory at vetting new customers and ensuring transactions on the exchange compiled with state banking, cybersecurity and other rules.
Coinbase will pay $50 million in settlement, with another $50 million spent to address the issues over the next two years.
The fine is another mark on the crypto world coming just months after the collapse of FTX in November of 2022. Other large names in the industry have filed for bankruptcy including BlockFi, Celsius Network and Voyager Digital. Bitcoin has fallen 63% compared to a year ago.
Coinbase was cleared by regulators in New York to operate in 2017, but the company has seen tremendous growth which has hindered its ability to monitor all transactions.
Coinbase stated recently that it has revamped its monitoring system to better detect patterns that could suggest things such as fraud, money laundering, or other illegal activities.
Paul Grewal, Coinbase’s Chief Legal Officer, stated, “We took the NYDFS’s concerns seriously and have taken substantial measures to address these historical shortcomings. We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space – for ourselves and others.”