Coinbase: Rachel Reeves has Davos breakfast with crypto firm which paid $100m over money-laundering failures

Rachel Reeves attended a breakfast event at Davos hosted by a crypto-asset company which last year was forced to pay out $100 million due to money-laundering compliance failures.

The Shadow Chancellor posted a photo on X (Twitter) about the discussion at the World Economic Forum, saying: “The next Labour government will work with the tech sector to bring jobs and prosperity to Britain.” She thanked Sriram Krishnan, from crypto investment firm Andreessen Horowitz, also known as ‘a16z’, for organising the breakfast, and crypto exchange Coinbase for hosting.

Positive Money, a non-profit organisation which campaigns for a democratic and sustainable economy, described the event as “extremely concerning”. Reeves is expected to hold the purse strings of the next government, with Labour 18 points ahead in Politico’s poll of polls.

Last year, Coinbase agreed to pay out $100 million (£82m) to settle a complaint from the New York State Department of Financial Services, after an investigation found that the company’s anti money laundering systems had left the exchange “vulnerable to serious criminal conduct”. The crypto firm had to pay a fine of $50 million to New York State, and invest $50 million in compliance measures.

Chief legal officer at Coinbase, Paul Grewal said the company “has taken substantial measures to address these historical shortcomings and remains committed to being a leader and role model in the crypto space”.

On Wednesday, the day before Reeves’ meeting in Davos, a court case opened in the US, with the Securities and Exchange Commission (SEC) alleging that Coinbase is ignoring its rules. The SEC sued the crypto-exchange last July.  Earlier this month, SEC chairman Gary Gensler said: “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

In recent years, the government has sought to position the UK as a “global hub for crypto-asset technology,” but the sector was rocked by the collapse of high-profile exchange FTX, the jailing of Sam Bankman-Fried and is now facing intensified scrutiny. This enthusiasm for crypto in the face of significant setbacks and differing regulatory approaches elsewhere, particularly in the US, has prompted questions from campaigners.

Last year, the Treasury Select Committee recommended crypto trading should be regulated like gambling, due to the volatility and potential for significant losses. The report also highlighted it is associated with criminal activities such as fraud and money laundering.

Labour has largely been seen as more negative towards cryptocurrency than the current government, with Rishi Sunak and ministers meeting a number of crypto firms, including Coinbase and Binance while it was under criminal investigation in the US. However, Reeves’ meeting and positive statement on X (Twitter) could mark a sea change in policy.

Simon Youel, head of policy and advocacy at Positive Money, told NationalWorld: "It is extremely concerning to see the Shadow Chancellor attending an event hosted by a crypto firm which has been plagued by allegations of serious criminal activities in the US. Hopefully this isn't a sign that the party will repeat the mistakes of the New Labour era, cosying up to crooks in the financial sector with the public left paying the price when the bubbles burst."

Reeves also spoke to crypto-investment firm a16z, which has twice met with Sunak in recent years. In 2023, a16z opened its first overseas office in London, with further plans for a “crypto startup school” in 2024. Sunak shared his support for the venture on Twitter, prompting a wave of positive reactions from crypto enthusiasts.

The moves are part of Labour’s strategy to appear more open to businesses. The party is currently consulting on whether to cut corporation tax, and Reeves has spent several days in Davos at the World Economic Forum. She told a meeting with JP Morgan that “with Labour, Britain will be open to business”. When former Shadow Chancellor John McDonnell attended the Swiss Alpine resort in 2018, he told the “elite” they were held “in contempt”.

The US in particular has embarked on a major crackdown on crypto companies in the last 12 months, with charges brought by the SEC against Binance and Coinbase. Both companies have been involved with lobbying the UK government in recent years. A16z was an early investor in Coinbase.

Kathryn Westmore, senior research fellow at The Royal United Services Institute, previously told NationalWorld that the UK’s regulatory approach to crypto as “one of collaboration between policy makers and the industry” which is very different to the US, and said the UK had not followed the recommendations of a recent report by MPs.

She said: “The approach that the UK has taken seems to have been welcomed by the industry; the Treasury Select Committee’s recent report which suggested a different model of regulation, treating crypto in the same way as gambling, was widely rejected by the industry.” Westmore stressed the need for robust regulation, given the potentially harmful applications for crypto technologies.

She added: “While the percentage of illicit activity is minimal when looking at the overall crypto transaction activity, appropriate safeguards need to be put in place to restrict heightened abuse. There is clear evidence of the malicious uses of crypto from hacks carried out by persistent state actors, laundering of funds by organised crime groups, and an abundance of scams relating to crypto-assets.”

In Coinbase’s case, the New York State Department of Financial Services (DFS) said failures in its compliance measures left it “ vulnerable to serious criminal conduct, including, among other things, examples of fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking”.

NationalWorld contacted Labour for comment.

Ralph Blackburn is NationalWorld’s politics editor based in Westminster, where he gets special access to Parliament, MPs and government briefings. If you liked this article you can follow Ralph on X (Twitter) here and sign up to his free weekly newsletter Politics Uncovered, which brings you the latest analysis and gossip from Westminster every Sunday morning.