Coinbase’s $3.6M Dutch Fine Shows Crypto Will Hit Road Bumps as It Goes Mainstream

As crypto comes within the regulatory fold, there will be disputes over rules, procedures and jurisdiction – and the relatively compliant may end up bearing the brunt of regulators’ wrath.

AccessTimeIconJan 26, 2023 at 5:56 p.m. UTC
Updated Jan 26, 2023 at 8:01 p.m. UTC

Coinbase’s fine for “very serious” breaches of Dutch crypto registration procedures reveals some of the many pitfalls the industry faces as it works towards operating within the regulatory fold.

The charge sheet from the Dutch central bank (DNB) outlining its decision to impose a sanction of 3,325,000 euros ($3.6 million) for serving local customers without approval shows multiple legal and procedural gray areas – and Coinbase, which is registered with DNB now, argues it is being punished for co-operating.

The size of the fine matches the one imposed on rival crypto exchange Binance last year, and for similar reasons. The DNB argues it’s justified by the gravity and scale of the violation, though Coinbase can still appeal, and may yet do so.

Coinbase originally applied for registration in September 2020 to offer exchange and wallet services – but it withdrew the application a few months later, unable to meet the strictures set by the DNB under an anti-money laundering law which, since 2020, has also applied to crypto.

Registration is a legal requirement to serve the Dutch market, but Coinbase didn’t actually gain the registration until 2022 – during which period it saw huge growth worldwide.

“There was a violation period of almost two years, during which the number of Dutch customers also doubled,” the DNB’s enforcement order said. “DNB therefore regards these violations as very serious.”

“Coinbase, as a globally operating provider of crypto services, should have been aware of the applicable laws and regulations,” it added. “DNB considers that Coinbase's actions are highly culpable.”

The tough stance does not come as a surprise from a country whose officials have been skeptical about retail access to crypto derivatives. The DNB has also issued warnings over KuCoin operating without a registration, and its governor, Klaas Knot, has hit out at underregulated crypto havens.

In a tweet sent Thursday, Paul Tang, a center-left Dutch member of the European Parliament, said the low level of the fine for selling risky products without a license was a “joke,” comparing the $3 million figure to the billions lost by investors in the crypto crash last year.

A spokesperson for Coinbase told CoinDesk it is still committed to compliance, but disagrees with the fine and is now considering whether to appeal. The company “should not be penalized for playing by the rules,” the spokesperson added, implying the DNB has unfairly targeted those who at least tried to engage with the process, and not those who ignored it entirely.

The document the DNB published on Thursday certainly exposes grounds for disagreement. It cites a “difference of opinion” between crypto providers and the DNB about exactly what verification requirements should apply to crypto wallets, and how far the regulator’s powers extend.

There’s also a dispute about whether Coinbase was offering services in the country at all. The company argued it didn’t have a marketing or ad campaign targeting the population, and that existing European Union rules on financial instrument trading should also apply to crypto marketing by analogy – but the DNB dug out a 2020 business plan that, it says, shows the company was focused on the Dutch market.

Such ambiguities are supposed to be resolved by forthcoming EU rules on the transfer of funds and on crypto asset markets. Those laws are supposed to detail what identity checks wallet providers need to carry out on their customers, and exactly when crypto providers can provide services to EU clients from overseas.

But in the meantime, the DNB fine shows regulators may paper over those gray areas with an approach that is resolutely black and white.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.