Coinbase's compliance path: comprehensive layout from the United States to Europe and Asia Pacific

Source: AiYing Compliance

Coinbase recently announced that Hawaii residents can now buy, sell and manage cryptocurrencies through its platform, as well as pledge assets and transfer funds internationally. This move is due to recent regulatory changes made by the Hawaii Department of Commerce and Consumer Affairs’ Division of Financial Institutions (DFI), which provides clearer guidance for cryptocurrency companies. According to data from The Block, Coinbase’s cryptocurrency trading volume in July 2023 was close to $64 billion.

Previously, Coinbase withdrew from the Hawaii market in 2017 because the regulatory policy at the time required the company to maintain a one-to-one cash reserve for the Bitcoin it held. This policy made it “impossible” for the company to continue operating in the state.

However, three years later, the HawaiiDivision of Financial Institutions (DFI) partnered with the Hawaii Technology Development Corporation (HTDC) to launch the Hawaii Digital Currency Innovation Lab (DCIL), a regulatory sandbox program. Under this plan, 12 companies including Gemini, Robinhood, and BlockFi can provide cryptocurrency services in Hawaii for two years without obtaining a state-level money transmission license.

Although the Hawaii Digital Currency Innovation Lab ends on June 30, 2024, cryptocurrency companies may continue to operate in Hawaii as unregulated businesses; however, such companies will be responsible for complying with any applicable federal licensing or registration requirements, including the forward Financial Crimes Enforcement Network, SEC and financial industry regulatory authority, and any relevant federal regulatory requirements. w="involve">involves consumer protection, anti-money laundering measures, etc. This means that these companies still need to operate in compliance with federal regulations when conducting digital currency transactions.

I. Compliance work at the US level

According to Aiying, Coinbase's compliance in the United States is very comprehensive, and it holds a variety of key licenses that enable it to operate legally at the state and federal levels. The following are Coinbase's current major compliance situations and licenses in the United States:

1. Money Transmission License (MTL): Coinbase holds money transmission licenses in most states in the United States. These licenses cover cash balances and transfers in US dollars, and in some states also apply to balances and transfers of cryptocurrencies, such as New York (BitLicense is required, and it also applies to cryptocurrencies), Washington State, Connecticut, and Minnesota. However, some states do not require money transmission licenses for cryptocurrency businesses, such as Texas and Montana.

2. Money Services Business (MSB) Registration: Coinbase is registered with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as a “Money Services Business,” which means it must comply with a number of financial services and consumer protection laws, including the Bank Secrecy Act and the USA PATRIOT Act.

3. BitLicense: Coinbase was one of the first companies to receive a BitLicense from the New York State Department of Financial Services (NYDFS). This license allows it to legally operate a cryptocurrency business in New York State.

4. Commodity Futures Trading Commission (CFTC): Coinbase recently received approval from the Commodity Futures Trading Commission (CFTC) to offer federally regulated cryptocurrency futures trading in the United States to qualified customers.

2. Global Compliance

According to Aiying, Coinbase has taken a number of compliance measures around the world, and obtained a number of key licenses, in addition to the United States, to ensure its legal operations in different jurisdictions. The following is Coinbase's compliance status and licenses in major global markets:

     1. United Kingdom:

• Coinbase is authorized by the Financial Conduct Authority (FCA) in the UK to issue electronic money (e-money) and provide payment services in accordance with the Electronic Money Regulations 2011. This means that Coinbase can legally provide a variety of financial services, including cryptocurrency trading, in the UK.

  2.EU:

• Registered as an electronic money institution in Ireland and regulated by the Central Bank of Ireland. Through this registration, Coinbase is able to provide cryptocurrency trading and related services throughout the EU. The Irish registration also makes Coinbase's operations in the EU in compliance with the requirements of the EU Fifth Anti-Money Laundering Directive (5AMLD).

• Obtained a license from the German Federal Financial Supervisory Authority (BaFin) in Germany, which enables it to legally provide cryptocurrency trading and custody services in Germany. BaFin is Germany's main financial regulator, responsible for supervising the country's banks, financial service providers, insurance companies and cryptocurrency companies, etc.

• Obtained a license from the Financial Markets Authority (AMF) in France to provide digital asset services in France. This includes cryptocurrency trading, custody and payment services. The AMF is France's main financial regulator, responsible for supervising and regulating financial markets and their participants.

• Registered as a cryptocurrency service provider in Italy and approved by the country's financial regulator. Italy's compliance requirements include measures such as anti-money laundering (AML) and customer identity verification (KYC)

• In The Netherlands, Coinbase obtained a license to operate in the country through registration with the Dutch Central Bank (DNB). This allows Coinbase to provide cryptocurrency trading and custody services and must comply with strict Dutch financial regulations.

• Passed the review of the local financial regulator in Spain and obtained a license to legally operate in the Spanish market. The Spanish regulatory framework requires cryptocurrency service providers to comply with anti-money laundering and data protection regulations.

With the Crypto-Assets Market Regulation (MiCA) coming into effect on June 30, 2024, member states are adjusting their respective regulations and regulatory frameworks to meet MiCA standards. Some countries have begun training regulators for the implementation of MiCA and building technical infrastructure to support the implementation of the new regulations. The regulatory standards for the crypto industry in the European market will also tend to be unified, without the need for multi-country applications, thereby reducing the current high compliance costs of many Wed3 institutions.

3. Singapore:

• Coinbase is regulated by the Monetary Authority of Singapore (MAS) in Singapore and has applied for a license under the Payment Services Act, which will allow it to legally provide payment services including cryptocurrency trading in Singapore.

4. Japan:

• Coinbase has obtained a license from the Financial Services Authority (FSA) in Japan to provide cryptocurrency trading services in Japan. This is because Japan's regulation of cryptocurrencies is extremely strict, and obtaining this license means that Coinbase's operations in this market are fully compliant.

5.Australia:

• Coinbase is registered as a digital currency exchange service provider in Australia and is regulated by the Australian Transaction Reports and Analysis Centre (AUSTRAC). This registration enables it to legally provide cryptocurrency exchange and other related services in Australia.