Last week, the Financial Conduct Authority (FCA) fined CB Payments Limited (CBPL), the UK arm of Coinbase, about £3 million ($4.5 million) for repeatedly breaching a requirement that prevented it from offering services to high-risk customers.

According to the FCA, CBPL does not undertake cryptoasset transactions for customers, but acts as a gateway to trade cryptoassets via other entities within the Coinbase Group. It is not registered to undertake cryptoasset activities in the UK.

In October 2020, CBPL entered into a voluntary requirement, which followed significant engagement with the regulator in respect of concerns about the effectiveness of CBPL’s financial crime control framework. Under the voluntary requirement, CBPL could not take on new high-risk customers while it addressed issues with its framework.

Charlotte Tregunna spoke to Cointelegraph about the development.

Charlotte explained that the enforcement action was likely to be a “one-off”, rather than a sign of the FCA taking a tougher stance against the crypto sector. She said:

“The fact that the FCA hasn’t used its enforcement powers until now suggest to me that it was using these as a last resort. CPBL had all the time in the world to sort out its systems and controls, and yet it didn’t in three years. It’s an obvious breach and the FCA can’t really ignore it if CPBL was given adequate time to resolve it.”

Charlotte added that it is unusual for such a situation to escalate to enforcement as, usually, if the FCA gets involved, firms take steps to remedy the breach. In addition, as the regulator is keen to be seen as being friendly to the sector, it will offer opportunities to crypto actors to improve their processes.

She said:

“If the FCA becomes involved, usually firms do everything they can to resolve the situation, particularly where it is a voluntary requirement – for example, if the firm has voluntarily agreed to improve its systems. It usually doesn’t have to get to this stage of enforcement.

“The FCA ultimately wants to be seen to be crypto and e-money friendly, within reason. It will provide opportunities for those providers and issuers to improve their standards and compliance frameworks, but if those opportunities are squandered then the FCA hasn’t really got much of a choice but to enforce.”

Charlotte concluded:

“This [development] is perhaps symptomatic of the fact that corporate governance and compliance culture within e-money issuers and cryptoasset service providers has not been able to keep up with the inexorable rise in the use of those services over the last few years.”