Coinme Under Fire: Washington State Seeks Ban

The crypto landscape continues to face headwinds as regulatory scrutiny intensifies. In a recent development, Coinme, a well-known Bitcoin on-ramp provider, is facing potential repercussions that could significantly impact its operations.

Allegations of Unfair Practices

The Washington State Department of Financial Institutions (DFI) has issued a Statement of Charges against Coinme and its CEO, Neil Bergquist. The charges allege that the company engaged in unfair and deceptive practices, violating the state's Uniform Money Services Act.

The core of the issue revolves around how Coinme accounted for unredeemed Bitcoin vouchers. Regulators claim that Coinme inappropriately recognized $2.2 million in 2023 and $6.17 million in 2024 from these unused balances as company income. The DFI alleges the company failed to disclose this practice or escheat the funds to the state as legally required.

Further accusations include failure to maintain the required tangible net worth, submission of inaccurate financial reports, and providing customers with receipts displaying an inactive support number.

Potential Consequences

If the DFI's charges are upheld, Coinme faces severe penalties, including:

• Revocation of its money transmitter license.
• A 10-year ban from the money-services industry for both Coinme and its CEO.
• Restitution or escheatment for affected customers.
• A $300,000 civil fine.
• Payment of investigation fees.
• Ongoing recordkeeping requirements.

Coinme has the right to contest these charges at an administrative hearing.

Key Takeaways

• Regulatory Pressure: This case highlights the increasing regulatory pressure on crypto companies to comply with financial regulations.
• Financial Transparency: Accurate and transparent financial reporting is crucial for maintaining regulatory compliance and customer trust.
• Industry Impact: The outcome of this case could set a precedent for how regulators treat unredeemed crypto vouchers and other similar financial instruments in the crypto space.

The broader crypto market continues to navigate a challenging environment, with several firms facing legal action and economic pressures. This situation underscores the importance of compliance and risk management within the industry.