German Regulator Calls on Coinbase to Improve Risk Management

Article Reading Time:
1 min.

At the German Federal Financial Supervisory Authority (BaFin) believe that Coinbase's German unit lacks effective internal controls.

BaFin came to this conclusion after an auditfinancial statements of the exchange, which showed that Coinbase Germany violated the standards established by the German Banking Law. The violation concerned section 25a (1), which requires the company to maintain risk management capabilities, have sufficient personnel, IT systems and transparent remuneration mechanisms employees to manage the enterprise in emergency situations.

The demands include the creation of “mechanismsallowing us to determine the financial condition of the company at any time with sufficient accuracy.” The watchdog found that Coinbase lacked “appropriate and effective risk management” when delegating the execution of its services to intermediaries. Therefore, BaFin requires Coinbase to develop and maintain an “outsourcing registry.”

In turn, the Coinbase Germany team assured that it is working closely with the regulator to eliminate the inconsistencies identified by the audit:

“In order to eliminate all problems identifiedBaFin, we have developed a corrective action plan for each item in the audit report. To date, we have made significant progress in this direction.”

In June, BaFin issued to the American exchangeCoinbase is licensed to provide cryptocurrency custodial services in the Federal Republic of Germany. In the spring, the regulator issued an official warning about “suspicion of violation” of German securities regulatory laws by the Binance exchange.