Dutch financial regulators are looking to introduce a licensing scheme for cryptocurrency exchanges and wallet service providers in the country. This is an effort to prevent vices such as money laundering and terrorism financing.
Licensing scheme should be provided for Dutch crypto exchanges and custody solutions
Earlier this week, the nation’s central bank, De Nederlandsche Bank (DNB), and the Netherlands Authority for the Financial Markets (AFM) published a report on cryptocurrencies. In the report, the two bodies suggested that fiat-to-crypto exchanges and custody solution providers must be licensed due to the high financial crime risks that cryptocurrency carry.
According to the report, “These risks must be addressed effectively, which can be achieved as a result of the international coordination of countermeasures that AMLD5 [the Fifth European Anti-Money Laundering Directive] provides.”
The report added that “The AFM and DNB recommend a licensing regime under the AntiMoney Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft) because this enables applicants to be assessed, and if necessary rejected, before they enter the market. Such a licensing regime requires clear communication about the scope of Wwft supervision for crypto service providers, as the Wwft is not concerned with protecting consumers or setting prudential standards. This must prevent misguided expectations of supervision on the part of consumers and service providers.”
The licensing regime will enable the regulatory bodies to access companies and determine if they will comply or can comply with the AMLD5 rules. They added that a registration regime would be less effective since it would only enable a limited substantive assessment of the companies.
European regulatory framework should be amended
The regulatory bodies also recommended that the European regulatory framework for corporate funding should be amended. The amendment should allow blockchain-based development of SMEs and also enable crypto assets to be used like shares or bonds.
The DNB and FM recommended that the national definition of a security and the broader definition in European legislation should be reconciled. This will help bring funding mechanism such as ICOs and STOs under the scope of applicable and existing rules.
The report added that “Amending the definition is also desirable in anticipation of a potential European consensus on the qualification of certain cryptos as security under present legislation.”
The regulators also urged the international community to roll out crypto rules. The number of Dutch-based providers of crypto services is less than 30, and due to that, they can’t implement changes on a large scale.
“The evolution of cryptos is primarily internationally-oriented given their inherent cross-border nature, and cannot be confined to the Dutch market alone,” the report added.
Cryptocurrency regulation is gaining pace all over the globe. Earlier this week, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) separately recommended regulations of ICOs at the EU level.