German BaFin Orders Coinbase to Improve ‘Organizational Deficiencies’

Germany’s financial markets regulator ordered the local Coinbase unit to ensure “good business organization” following shortcomings in an annual audit of the crypto company’s financial statements.

Announced on Tuesday, the Federal Financial Supervisory Authority (BaFin) clarified that the German entity of Coinbase violates the standards set by German banking law. The specific section in violation of the law outlines requirements for maintaining risk bearing capacity, adequate staffing and emergency management mechanisms.

The Financial Times detailed that the audit firm Deloitte provided an unqualified audit opinion on the financial statements of the German unit of Coinbase. This means that the audited figures were accurate and fair, but with some organizational flaws, which were reported to the regulator.

“An audit of the annual accounts revealed organizational shortcomings at the institute. The regularity of the company’s organization was not given in all audited areas,” said the regulator (translated from German) .

In a statement to the media, a Coinbase spokesperson assured that the company is “fully cooperating” to address the discrepancies found during the audit. “We have developed a remediation plan that fully addresses each finding in the audit report to address BaFin’s concerns. To date, we have made substantial progress on this plan,” the spokesperson added.

A major crypto exchange

California-based Coinbase is one of the largest cryptocurrency companies that has grown globally with its services. It received permission from Germany’s BaFin last year to provide cryptocurrency custody services.

Meanwhile, the downturn in the cryptocurrency market also impacted Coinbase’s performance. The exchange reported losses of more than $1 billion and $545 million in the second and third quarters of the current year, respectively. The company’s revenue also fell drastically, reaching $576 million in the third quarter, down more than 28% from the previous quarter and 53% from the third quarter of 2021.

Coinbase further pointed out that crypto trading activities are moving away from US exchanges. This market trend may have prompted Coinbase to establish its international bases: it recently received regulatory approval in Singapore and several European licenses.

Coinbase’s publicly traded shares have taken a dent in the current industry turmoil. Coinbase shares closed nearly 11% lower on Monday and are down more than 85% since listing directly on Nasdaq last year in April.

Concerned about the impact of FTX vulnerabilities, Coinbase recently revealed that it only has $15 million in deposits on FTX, which is to be acquired by rival Binance.

Germany’s financial markets regulator ordered the local Coinbase unit to ensure “good business organization” following shortcomings in an annual audit of the crypto company’s financial statements.

Announced on Tuesday, the Federal Financial Supervisory Authority (BaFin) clarified that the German entity of Coinbase violates the standards set by German banking law. The specific section in violation of the law outlines requirements for maintaining risk bearing capacity, adequate staffing and emergency management mechanisms.

The Financial Times detailed that the audit firm Deloitte provided an unqualified audit opinion on the financial statements of the German unit of Coinbase. This means that the audited figures were accurate and fair, but with some organizational flaws, which were reported to the regulator.

“An audit of the annual accounts revealed organizational shortcomings at the institute. The regularity of the company’s organization was not given in all audited areas,” said the regulator (translated from German) .

In a statement to the media, a Coinbase spokesperson assured that the company is “fully cooperating” to address the discrepancies found during the audit. “We have developed a remediation plan that fully addresses each finding in the audit report to address BaFin’s concerns. To date, we have made substantial progress on this plan,” the spokesperson added.

A major crypto exchange

California-based Coinbase is one of the largest cryptocurrency companies that has grown globally with its services. It received permission from Germany’s BaFin last year to provide cryptocurrency custody services.

Meanwhile, the downturn in the cryptocurrency market also impacted Coinbase’s performance. The exchange reported losses of more than $1 billion and $545 million in the second and third quarters of the current year, respectively. The company’s revenue also fell drastically, reaching $576 million in the third quarter, down more than 28% from the previous quarter and 53% from the third quarter of 2021.

Coinbase further pointed out that crypto trading activities are moving away from US exchanges. This market trend may have prompted Coinbase to establish its international bases: it recently received regulatory approval in Singapore and several European licenses.

Coinbase’s publicly traded shares have taken a dent in the current industry turmoil. Coinbase shares closed nearly 11% lower on Monday and are down more than 85% since listing directly on Nasdaq last year in April.

Concerned about the impact of FTX vulnerabilities, Coinbase recently revealed that it only has $15 million in deposits on FTX, which is to be acquired by rival Binance.

Aubrey L. Morgan