Coinbase in trouble with German regulators

The German Federal Financial Supervisory Authority (BaFin) has decided to warn Coinbase of its irregular situation in the country. The regulator pointed out that the exchange platform violated standards set by German banking law.

The past year has been one of the most difficult periods for companies working with digital assets around the world. The bearish state of the market, combined with a poor risk management strategy, has meant that projects as large as Moon eventually collapses. These events caused regulators to apply greater scrutiny on licensed companies operating cryptocurrencies in their region.

The extension of Coinbase, Germany, was one of the last companies to be audited by regulators. Coinbase Germany has obtained the license to operate cryptocurrencies in the country in 2021. This license is issued by the Federal Financial Supervisory Authority (BaFin), the same regulator that has now issued a warning about the stock market situation.

Last Tuesday, the financial watchdog ordered Coinbase to ensure the establishment of an effective system of risk management and internal controls. The regulator reportedly conducted an audit that found a number of organizational deficiencies. These deficiencies could affect both the value of the company’s assets and its market value. exchange and its customers and collaborators.

The BaFin pointed out that Coinbase violated the standards of the German Banking Act, particularly Section 25a (1).. This section sets out requirements for companies to maintain the ability to: take risks, have adequate staffing, emergency management mechanisms such as IT systems, and transparent remuneration systems for employees, including managers.

The statement ends with the following sentence: “An audit of annual financial statements revealed organizational deficiencies in the institution. The regularity of the business organization did not exist in all areas audited.“. Regulations to address this type of organizational problem in entities such as Coinbase went into effect on October 27.. For this reason, the regulator allows the exchange to continue operating, as its license will remain in effect if the above-mentioned points are corrected.

Coinbase will have to implement the appropriate changes to enable the institution’s financial position to be determined at all times. BaFin has determined that Coinbase does not have adequate risk governance in place to manage the transactions and services it normally performs.since it is an extension, most of these services are outsourced to other parties established in the country. For this reason, another of the specified requirements is that Coinbase ensures that it maintains a “risk management system.”a register of outsourcing“which is constantly updated.

According to relevant sources, Coinbase is working directly with regulators to restore compliance in the German region. It is not known what deadline BaFin has given the operator to resolve the situation.

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