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Dutch Financial Authority ”Seriously Doubts” Crypto’s Conformity with Licensing Laws

The Netherlands Authority for the Financial Markets (AFM) sent an official letter dated 13 June to marketing participants looking to offer cryptocurrency investments, stating the department had ”serious doubts” that cryptocurrencies can conform to licensing laws.

The primary reasoning given is that in part, the instabilities associated with managing cryptocurrencies are too great. The letter reads: “The AFM has serious doubts, partly because of the risks associated with cryptos and their management.”

These ”risks” were defined by the financial regulatory body as meaning companies offering cryptocurrency investments may well fall short on governmental licensing obligations, as the letter claims there is ”limited knowledge of these requirements for many market parties”.

The post concludes, “In combination with the risks associated with cryptos, the AFM has serious doubts whether managers of investment institutions in cryptos can meet the requirements for licensing.”

While cryptocurrency investment is not an activity directly regulated by the Netherlands’ Financial Supervision Act, the AFM notes on its website that there are circumstances where actions do fall within its legislative jurisdiction.

The Dutch crypto stance

These comments are not largely surprising, given the Dutch government’s generally critical stance on the cryptocurrency industry. While the field is still emerging, it will take time for all firms to be able to provide sound, reliable investment opportunities.

Earlier this month, Netherland’s central bank, De Nederlandsche Bank, stated that as blockchain technology now stands, it is not fit for purpose of being a payment system. A lack of scalability with large volumes of transactions was quoted as the main issue.

In May, a government report did quote cryptocurrencies to be ”low risk” in regards to the countries financial stability, so long as banks do not get involved in the processes. However, many in the industry believe bank involvement is required to provide legitimacy to cryptocurrencies that it is currently searching for, so this is not necessarily a positive statement.

 

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