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Dutch Authorities to Curb Crypto Trading Anonymity

Dutch Authorities to Curb Crypto Trading Anonymity

The Netherlands Authority for Financial Markets (AFM) and the central bank, De Nederlandsche Bank (DNB), are making recommendations to put an end to anonymous buying and selling of cryptocurrencies in the Netherlands.

Under proposed new rules, all crypto exchanges and wallet providers would be required to apply for a special license to operate, with Finance Minister Wopke Hoekstra pushing forward the new changes.

Some feel that this may be an “after the horse has bolted” scenario given what has been regarded as a largely uncontrolled crypto market in the country over the 18 months; a period where first-time investors have risked losses due to inexperienced and occasion fraud events. Also, given that many investors have withdrawn from the market due to dip in cryptocurrency values, some exchanges think this has a come a bit too late.

However, figures do illustrate that the industry has remained vulnerable, with Dutch police’s Financial Intelligence Unit (FIU) reporting digital-relegated fraud rising since the beginning of last year from an average of 300 to nearly 5,000 a year.

It is possible the Dutch are simply responding to last year’s new AML directive introduced by member states of the EU which stipulates that cryptocurrency trading platforms follow the same AML laws as traditional financial institutions. Under these laws, the 27 nations of the EU are also required exchanges to keep full records of transactions and report those which are felt to be in any way dubious.


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Dutch Speed Trading Firm to Trade Crypto Despite Regulator Concerns

Amsterdam-based Flow Traders NV, Europe’s largest trader of exchange-traded funds is now going crypto, but it has turned out not to be a move recommended by the Dutch Authority for the Financial Markets (AFM), according to Cointelegraph.

Flow Traders NV is reputed to be the first trader to buy and sell exchange-traded notes based on Bitcoin and, by association, is likely to encourage clientele to cryptocurrency from traditional stock, particularly given cryptocurrencies such as Bitcoin and Ethereum’s ease of purchase.

Co-CEO Flow Traders NV Dennis Dijkstra believes that cryptocurrencies are underestimated. He said:

“It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested – we know they are because we get requests.”

The AFM doesn’t share these sentiments claiming that cryptocurrencies such as Bitcoin and Ethereum are not regarded as an asset class by the authority. However, as the exchange is regulated there is little the government agency can do to forestall crypto trading activity. Nienke Torensma, a spokeswoman for the AFM, is quoted as stating:

“We discourage activities in cryptos both by consumers and professional license holders. By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don’t regard it to be an asset class.”

Earlier this year, the AFM made attempts to dissuade companies considering trading in cryptocurrency to reconsider by circulating a letter suggesting that such activities came with risks and that any attempt to offer the new service may put their current licensing in question.

This is a curious move given the Dutch government reported just a month prior to the circulation of the warning letter, that cryptocurrencies posed little risk to financial stability, but it did call for further regulation.

The report stated that although cryptocurrencies pose a low risk to the financial system at this time, due to comparatively low levels of capitalization, the risk would increase with an increase of involvement by government and financial institutions in the future.


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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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