Dutch Central Bank Prepares to Start Regulating Crypto Sector
The central bank of the Netherlands is preparing to supervise the country’s crypto sector. The bank has requested crypto exchanges and wallet providers to come forward and submit some information. Once the law takes effect, these operators will be required to register with the central bank to continue operations.
Also read: Crypto Can Boost Indian Economy – How Banning Will Hurt it
Central Bank to Supervise Crypto Firms
The Netherlands’ central bank, De Nederlandsche Bank (DNB), announced Tuesday that it is preparing to start supervising crypto exchanges and custodian wallet providers. Noting that these operators are expected to become subject to its supervision starting Jan. 10, 2020, the bank detailed:
In concrete terms, firms offering services for the exchange between cryptos and regular money, and crypto wallet providers must register with De Nederlandsche Bank.
The DNB added that it will also assess the firms’ board members, some shareholders, and other policymakers. Further, these companies “must demonstrate that their processes are effectively designed to prevent money laundering and terrorist financing, and that board members and other policymakers adequately manage these processes.” The bank emphasized:
Firms that do not register will no longer be allowed to provide crypto exchange services and wallets.
These requirements stem from the fifth European anti-money laundering directive (AMLD5), the bank explained, adding that it is required to supervise crypto businesses under this directive and its implementation into Dutch law. Reiterating that the requirements must be implemented by Jan. 10 next year, the bank clarified: “The aim is for the amended Act to enter into force on that date. This means that the requirements apply as of that date, and that parties must also register as of that date.”
The Dutch central bank has acknowledged the growth of the crypto sector, stating that “New crypto applications keep appearing and the cryptoecosystem continues to evolve.” However, it is also concerned with the risks it associates with crypto assets. The DNB and the Dutch Authority for the Financial Markets (AFM), the independent market conduct authority that oversees the entire financial market sector, have warned the public several times about the risks associated with crypto.
The bank noted that “The rise of cryptos demands an adequate response from the supervisory authorities,” emphasizing the necessity of “a fitting and proportional regulatory framework.” Together with the AFM, the bank called for the regulation of the crypto sector in January, recommending the implementation of a licensing system for crypto exchanges and wallet providers. The proposal for a licensing system was included in the original bill submitted to parliament but was later removed.
Which Providers Are Requested to Come Forward
With Tuesday’s announcement, the DNB has also requested some information from crypto business operators by Sept. 23.
Notifications are requested from “anyone offering services for the exchange of virtual and fiat currencies in, or from, the Netherlands in a professional capacity or on a commercial basis,” and “anyone offering custodian wallets in, or from, the Netherlands in a professional capacity or on a commercial basis,” the bank described. The former includes exchanges, intermediaries, and providers of cryptocurrency automated teller machines (ATMs). According to the legislative proposal, “The person effectively operating the ATM is considered to be the provider of the exchange service.” The DNB also explained that whether the providers are domiciled in the Netherlands is irrelevant, as all providers offering services in the country, including via a website, must register with it.
The request is not mandatory, however, as it is intended for the bank to get a clearer picture of the number of service providers that will need to be registered, as well as their contact information. “This request is to enable us to better prepare ourselves and the parties that will be subject to our supervision,” the bank explained. “At a later stage, we will notify these parties about the registration requirement, the necessary steps they must take, and when they can register.” The DNB also noted that once the Act enters into force, it will have the authority to request information, carry out investigations, and take enforcement action against those that do not cooperate.
The Dutch Bill to Regulate the Crypto Industry
The Act implementing AMLD5 was submitted by the Dutch finance minister to the House of Representatives on July 2. This legislative proposal implements the AMLD5 through the country’s Anti-money Laundering and Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft).
Originally the draft bill proposed a licensing requirement for crypto exchanges and wallet providers, as recommended by the central bank and the AFM. However, Karen Berg, counsel at Bird & Bird law firm in the Netherlands, recently explained that the Dutch Council of State had a negative view on the original bill and advised the finance minister to abolish the licensing requirement. The council is tasked with advising the country’s parliament on draft legislation that the government sends to parliament and assessing draft bills on certain specific aspects, including compliance with the European directives.
The council explained that the AMLD5 does not offer a choice between a licensing and a registration requirement for crypto exchanges and wallet providers, therefore the proposed licensing requirement is “not permitted,” Berg conveyed. While acknowledging that the licensing system recommended by the central bank and the AFM “would contribute to the effectiveness and execution of supervision,” the lawyer said that the council believes it “does not mean that such measure is proportionate given the burden it imposes on the service providers.”
The finance minister subsequently made a number of amendments to the legislative proposal, incorporating the advice of the council and the Dutch Data Protection Authority, as well as responses from various consultations. Berg detailed that the licensing requirement has been replaced by a registration requirement in the bill sent to parliament, noting that the final legislative proposal follows European legislation fairly closely. According to the lawyer, the bill also “provides for a transitional period of six months for the registration obligation of existing providers of crypto exchange services and crypto wallets.”
What do you think of the Dutch central bank supervising crypto service providers? Let us know in the comments section below.
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