Coinbase Europe Faces €21.5 Million Penalty
Coinbase Europe has faced a staggering €21.5 million ($25 million) penalty from the Central Bank of Ireland due to significant shortcomings in its transaction monitoring systems. This resulted in approximately 30 million unmonitored transactions between 2021 and 2022, accounting for 31% of the company’s business volume during that timeframe, implicating about €173 billion worth of transactions.
Impact of the Fine
The fine, which ranks as the fourth-largest imposed by Ireland’s financial regulator, has led to Coinbase Europe’s decision to cease operations in Ireland and relocate to Luxembourg. Its status as a registered Virtual Asset Service Provider (VASP) is set to expire by the end of 2025.
Deficiencies in Compliance Protocols
The crux of the enforcement action was related to deficiencies in Coinbase Europe’s anti-money laundering (AML) compliance protocols. Notably, the company had relied on its U.S. parent firm, Coinbase Inc., to handle transaction monitoring. However, due to issues with data configuration, a total of five high-risk monitoring scenarios fell short of functioning correctly from April 23, 2021, to April 29, 2022. This lapse went unnoticed by Coinbase Europe until February 2023 when the company was first alerted to the deficiencies.
Senior management only recognized the severity of the situation months later in May 2023, highlighting a failure to adequately address the risks involved.
Consequences of Monitoring Failures
The process of re-evaluating the unmonitored transactions endured nearly three years, leading to a significant delay in submitting suspicious transaction reports. This lag, according to the Central Bank, severely compromised the effectiveness of these reports. Compounding the issue, Coinbase Europe did not disclose these monitoring deficiencies during its VASP registration process in December 2022.
Prior to this, during a September 2022 meeting with the Central Bank regarding its VASP application, the company indicated that it was devising strategies to clear up a backlog of compliance challenges without mentioning any ongoing monitoring failures.
Increased Scrutiny and Future Compliance
Upon becoming aware of the monitoring issues, the Central Bank imposed heightened scrutiny on Coinbase Europe, mandating a series of improvements to its AML frameworks and overall compliance operations. The settlement documents indicated that the systems in place at Coinbase Europe were inadequate for supervising the efforts of Coinbase Inc.
A specific violation acknowledged by Coinbase continues through March 19, 2025, related to the failure to conduct thorough monitoring on a significant number of transactions (184,790). This enforcement action coincided with Coinbase’s commentary submitted to the U.S. Treasury in 2025, where it advocated for the recognition of Know Your Transaction (KYT) screening and blockchain analytics as effective tools for enhancing compliance with AML and counter-terrorism financing measures.
These comments emphasized the company’s use of application programming interfaces (APIs) for real-time monitoring and risk assessment, reinforcing Coinbase’s commitment to remain at the forefront of compliance innovation.
Conclusion
In light of these developments, Coinbase Europe has successfully secured a license in Luxembourg through a distinct regulatory procedure. However, the firm did not respond to inquiries concerning the recent enforcement actions undertaken by Irish regulators, while the Central Bank of Ireland refrained from further commentary beyond the details detailed in the settlement.
