Coinbase Europe Limited settled with the Irish central bank over negligence in its transaction monitoring system – and it cost the exchange 21.5 million euros ($24.7 million). The reason was errors in the code, which meant that in 2021-2022 some transactions were not properly verified for suspicious activity. Has the industry already drawn conclusions and knows how costly code errors can be?
When digital assets encounter bugs
The issue involved three code errors that occurred in five of 21 transaction monitoring scenarios. The Coinbase compliance system was unable to check cryptocurrency addresses separated by special characters. As a result, some transactions passed through the inspection screen too smoothly.
Coinbase discovered the issue during internal testing and fixed it within a few weeks. All affected transactions were then analyzed and there were 185,000 of them with a total value exceeding USD 202 billion, which represented approximately 31% of all Coinbase Europe transactions during this period. This review resulted in approximately 2,700 suspicious transaction reports worth approximately $15 million, filed in accordance with the requirements of Irish AML law.
The price of error? Almost a quarter of a billion USD!
The central bank based the penalty amount on Coinbase’s average annual revenue in Ireland between 2021 and 2024 – estimated at $480 million. This is a clear signal for the industry: even technical shortcomings in compliance can cost a fortune. After discovering the issue, Coinbase strengthened its testing and oversight procedures for its transaction monitoring system. More stringent pre-deployment reviews have been introduced, scenario testing has been expanded and continuous improvements have been implemented to detect evolving high-risk activity.
Ireland as a European cryptocurrency center
It is worth recalling that Coinbase opened an office in Dublin in 2018, and a year later it received one of the few e-money licenses in the country. In 2023, the exchange officially chose Ireland as its European cryptocurrency hub – just before the entry into force of the MiCA regulation, which allows it to operate in all 27 EU member states.
This penalty is further proof that in the world of regulated cryptocurrencies there is no place for technical oversights. Even if the error was unintentional, full liability remains. Maybe it’s a good time for stock exchanges to invest more in programmers and code writing?
