Coinbase violates German banking law, regulator says

Regulators seem to be gradually becoming more open to cryptocurrencies, but that doesn’t mean that everything is suddenly bright and sunny. On the contrary, regulators want to impose stricter requirements, especially on exchanges. In Germany it is Coinbase’s turn. According to BaFin, the German Financial Markets Authority, has Coinbase several “requirements for a good business organization” violated.

Is Coinbase a bank?

BaFin wants Coinbase to be clearer makes what kind of company it is exactly. That may sound a bit absurd, everyone in the crypto world knows of course that it is one of the largest crypto trading platforms in the world. But from a regulatory perspective, things are a little more complicated.

Crypto-exchange’ kan namely amount to one type of bank, or to a financial service provider of another type. Both categories are regulated differently. This way you as a bank have a large number of financial stability requirements that you must meet. Many of these rules are in place to protect bank customers and to prevent the bank from going bankrupt due to excessive risks.

Coinbase also needs to better monitor and manage its risks from the German government. It must at all times have insight into the risks it is running and be able to provide audits to demonstrate that it does indeed own the assets it claims to have.

The label ‘bank’ is quite demanding in Europe. In the worst case scenario, it must comply with Basel III-like rules, but it is also possible that this goes too far. Perhaps the category ‘financial service provider’ is less strict. This includes, for example, many investment funds and payment processors, of which Coinbase also has properties.

Read Also:  Bank Giant Enters Bitcoin and Crypto Trading

Governments open to crypto, but skeptical

Not so long ago, crypto was not something that most governments put a lot of time into at all for most governments, but that seems different now. Yesterday we wrote that De Nederlandsche Bank believes that it should be well regulated precisely because the crypto market is so risky.

According to DNB, cryptocurrencies do not meet the definition of ‘money’, but the underlying blockchain technology has a lot of potential, according to the central bank. If the industry continues to grow in the coming years, we will undoubtedly hear more from policymakers.

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