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BaFin warned Coinbase about “access issues”

News
BaFin warned Coinbase about “access issues”

According to the German Federal Financial Supervisory Authority (BaFin), Coinbase has to resolve several shortcomings, including maintaining proper risk management, workforce, and IT systems.

Following the discovery of “organizational shortcomings” during an examination of the company’s financial records, the german watchdog ordered Coinbase’s local branch to ensure it has appropriate risk management and internal controls in place, according to a statement released Tuesday.

BaFin: coinbase violated the German banking act’s requirements.

The German Banking Act’s requirements were broken, according to the Federal Financial Supervisory Authority, or BaFin. The declaration referred to Section 25a (1) of the Act, which establishes guidelines for businesses on maintaining risk-bearing capacity, proper personnel, emergency management systems such as IT systems, and available compensation structures for all staff members, including management.

BaFin granted Coinbase Germany authorization to offer crypto custody services last year. BaFin has released this statement:

“Organizational issues at the institute were discovered during an examination of the yearly financial accounts. Not all audited areas provided evidence of the company organization’s regularity. Since October 27th, the directive to resolve organizational problems has been in force.”

In a blog post at the time, Coinbase stated its commitment to offering consumers in Germany and worldwide the most reliable and user-friendly cryptocurrency services. According to them, obtaining a license in Germany was a significant step in their mission to promote economic freedom everywhere.

In addition to internal controls, BaFin discovered that Coinbase Germany lacked “adequate and effective risk management” for situations where the business outsources transactions or services generally handled by it. BaFin requests that Coinbase maintain “an outsourced registry as part of its risk management” by the sections of the Banking Act that it cites in its statement.

Following the publication of this story, a spokeswoman for Coinbase revealed that the company is “cooperating completely” to resolve the audit’s findings.

“To alleviate the worries of BaFin, we have created a remediation plan that thoroughly addresses each conclusion in the audit report.” 

According to the statement the firm had made significant progress toward this goal.

“Coinbase views regulation as a business facilitator, and the procedure to implement the BaFin-identified steps has already started. In order to thoroughly address each issue in the audit report, we have created a remediation plan to allay BaFin’s worries. We have advanced this strategy significantly thus far.”

Cryptocurrency gaining more attention from watchdogs

In July 2021, months after the german bank received regulatory nodes to manage digital assets for clients, Germany’s banking watchdog first granted a license to Coinbase’s local branch allowing the exchange to hold digital assets there. The action came after German legislators passed laws requiring businesses seeking to offer cryptocurrency services to get BaFin clearance beginning in January 2020.

Regulators are paying more attention to cryptocurrency businesses globally following a challenging year that saw some well-known names fail, partially due to subpar risk-management techniques. Even nations like Germany and Singapore, which have extensive crypto regulatory frameworks, are keeping a closer eye on service providers.