Coinbase’s Russian Data Localization Fine: Compliance Clampdown

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November 12, 2023 by Ammar Raza

In a recent regulatory setback for the United States-based cryptocurrency exchange Coinbase, the Moscow District Court has imposed a fine of approximately $10,840 on the platform for its failure to localize the data of Russian users within the Russian Federation, according to Russia’s local media report. 

Coinbase Non-Compliance

Alongside Coinbase, the international association AIDA International was also fined for non-compliance. The magistrate’s court, located at the Judicial District 422 in Moscow, charged both Coinbase and AIDA International with an administrative offense under Part 8 of Article 13.11 of the Code of Administrative Offenses of the Russian Federation. 

This specific charge pertains to the failure of operators to ensure the proper recording, systematization, accumulation, and storage of data of Russian citizens when collecting personal information.

The court’s decision comes in the wake of a directive issued by the Federal Service for Supervision of Communications, Information Technology, and Mass Media (Roskomnadzor) in May 2023. According to this directive, foreign services were required to localize databases of Russian users within the Russian Federation by July 1, 2023.

The fine imposed on Coinbase and AIDA International amounts to 1 million Rubles each, with the court indicating that this is the minimum penalty under the relevant article. Notably, both companies were warned of potential fines reaching up to 6 million Rubles ($65,040) for their non-compliance.

This decision follows a series of fines imposed on several international companies, including Spotify, Apple, WhatsApp, Airbnb, Google, and others, for similar data localization non-compliance issues. Approximately 600 representative offices of foreign companies in Russia have complied with this requirement, local media reports.

Additionally, Zoom, a video communication service, was fined 15 million rubles for repeated refusal to localize Russian user data, while Telegram paid 50,000 rubles in fines. 

The enforcement of data localization laws in Russia underscores the increasing regulatory pressures on foreign companies operating within the country’s digital sphere. These recent penalties highlight the strict enforcement of compliance with data localization regulations in Russia.

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