The Central Bank of Ireland has levied a significant €21.5 million fine against Coinbase Europe for extensive failures in its legal duties to monitor transactions for money laundering and terrorist financing. The penalty, the fourth-largest ever imposed by the Irish financial regulator, marks the first time it has sanctioned a virtual asset service provider, signaling heightened scrutiny of the cryptocurrency sector. The enforcement action addresses breaches that occurred between 2021 and 2025, less than three years after Coinbase received its authorization from the authority.
The core of the issue involved the company’s failure to properly screen more than 30 million transactions over a one-year period, representing a total value exceeding €176 billion. These lapses stemmed from what Coinbase described as “technical programming errors” in its automated monitoring software, which allowed a third of all its transfers to go unreviewed. After the discovery of these flaws, it took the company nearly three years to complete the backlog of transaction reviews, ultimately leading to thousands of belated reports on suspicious activities potentially linked to serious criminal operations.
Scope of the Monitoring Breakdown
The regulatory investigation found that for 12 months, from April 2021 to April 2022, Coinbase Europe failed to monitor approximately 30.5 million individual transactions. This oversight accounted for nearly a third (31%) of all transactions processed by the European entity during that period. The cumulative value of these unscreened transfers was more than €176 billion. The firm is legally required as a registered “virtual asset service provider” (VASP) in Ireland, where it has its European headquarters, to maintain continuous monitoring of customer transactions to detect and report suspicious behavior. The breakdown represented a systemic failure to comply with these fundamental anti-money laundering (AML) and counter-terrorist financing (CTF) obligations.
Systemic Flaws and Technical Errors
The investigation traced the massive compliance failure to deep-seated technical and organizational problems. The company’s European arm had outsourced key parts of its transaction monitoring operations to its US-based sister company, Coinbase Inc. However, the Central Bank determined that Coinbase Europe’s systems for overseeing the outsourced work were ineffective, leaving it unaware of the problems for a significant period.
Software and Coding Deficiencies
At the heart of the failure were critical coding errors in the transaction-monitoring software. According to the regulator, five of the 21 automated monitoring scenarios designed to flag high-risk behavior were not functioning correctly. In one specific example highlighted by the Central Bank, the software was unable to properly parse and screen cryptocurrency wallet addresses that contained special characters. This single flaw meant a large volume of transactions automatically bypassed the company’s compliance filters without any review. Coinbase stated it identified the issues through internal testing and corrected the software bugs within weeks, but the process of reviewing the immense backlog of missed transactions proved far more time-consuming.
Delayed Discovery of Suspicious Transactions
The consequences of the monitoring lapse were significant, delaying the detection and reporting of potentially illicit funds. After initiating a review of the 30 million unscreened transactions, Coinbase eventually flagged 184,790 of them for further investigation. This internal review resulted in the company filing approximately 2,700 suspicious transaction reports with the relevant national financial intelligence unit and revenue commissioners. These reports, which were filed nearly three years late, covered transactions valued at more than €13 million. The Central Bank noted that these late reports contained information on transactions suspected of being associated with a range of serious criminal activities, including fraud, money laundering, drug trafficking, cyberattacks, and the financing of child sexual exploitation. While regulators did not confirm if the transactions definitively resulted in criminal acts, they emphasized that the failure to monitor them in the first place constituted a major regulatory breach.
A Precedent-Setting Regulatory Action
The penalty against Coinbase represents a landmark enforcement action for the Central Bank of Ireland in the digital asset space. It is the first time the regulator has fined a VASP, sending a clear message to the rapidly growing crypto industry about compliance expectations. Colm Kincaid, a deputy governor at the bank, noted that the inherent features of crypto, such as its “anonymity-enhancing capabilities and cross-border nature,” make it particularly attractive to criminals seeking to move illicit funds.
Details of the Settlement
The €21.5 million fine was the result of a settlement agreement between Coinbase and the regulator. The Central Bank initially calculated a penalty of more than €30 million (€30.7 million), but this was reduced by 30% under the authority’s settlement discount program. The fine’s calculation was based on Coinbase Europe’s average annual revenue of €417 million during the period of the breaches. Coinbase accepted the reprimand and the fine, which now awaits final confirmation from Ireland’s High Court.
Coinbase’s Response and Remediation
In response to the fine, Coinbase acknowledged the past compliance failures and reiterated its commitment to regulatory obligations. The company attributed the oversight to “technical programming errors” that have since been fully corrected. In a public statement, the exchange said, “Our goal has always been and will always be to build the most trusted, compliant, and secure platform in the world.” The company emphasized that it discovered the issues internally, rectified the software flaws promptly, and has since enhanced its compliance systems to prevent a recurrence of such failures. The firm fully cooperated with the Central Bank’s investigation leading up to the settlement.