- De Nederlandsche Bank (Dutch Central Bank) issued a warning against Binance for illegal operations in the country.
- The Netherlands is a practical location for individuals to own cryptocurrencies because there are no capital gains taxes.
- Dutch Central Bank regulations have pushed a lot of Bitcoin and cryptocurrency businesses outside the country.
- The regulators have unjustifiably increased regulatory actions forcing companies to mediate the issue in the courtroom.
The Netherlands has issued a warning against cryptocurrency exchange Binance for operating illegally, becoming another nation that has enforced a regulatory stance on crypto. Furthermore, in May 2020, the Netherlands introduced the Dutch Implementation Act as a European directive to stringent AML rules, with the Dutch Central Bank being the prime regulatory entity for cryptocurrencies.
Crypto-related activities in the Netherlands have come under increased surveillance mainly due to compliance issues. Yet, according to Crypto trader Petoshi’s Twitter, enforcing regulations with KYC is “good for the space.” However, nation-states are further restricting cryptocurrency firms that are operating without harsh constraints.
The Dutch Central Bank Dilemma
Cryptocurrencies, especially Bitcoin, developed to answer acute distrust towards the banking industry following the 2008 market meltdown. However, in the Netherlands, the Dutch Central Bank (DNB) is the regulatory body entitled to register cryptocurrency activities.
During an exclusive interview with DailyCoin, BitKassa and Arnhem Bitcoin City co-founder Patrick van der Meijde emphasized country regulatory enforcements are “mainly targeted at companies” that interact directly with cryptos, such as exchanging fiat to crypto currencies and vice versa.
BitKassa was forced to close its profitable exchange operations because the requirements were unrealizable. Yet, the company continues its payment services but no longer converts bitcoins to euros for merchants. Instead, merchants receive bitcoins directly into their wallets.
"For companies is a different story; that's why BitKassa has stopped its exchange service. Because we need registration with the DNB, which is the authority for regulation for crypto in the Netherlands, and it is a bad idea to put a central bank in such a position."
Moreover, Patrick argues the harsh regulatory conditions, such as the exorbitant fees, or unrealizable requests, pushed many crypto services to either relocate outside of The Netherlands or cease their operation. As a result, crypto users were moved to outside exchanges such as “Binance who would not be subject to such absurd regulations.”
On The Flipside
- The Netherlands is very relaxed when it comes to owning and transacting cryptocurrencies by individuals
- There is no capital gains tax in the Netherlands, only wealth tax.
- Binance and other cryptocurrency services could still be used in the country despite the Dutch Central Bank warning.
Harsh Without Reason
The Dutch Central Bank’s authority over the cryptocurrency landscape is worrisome for the innovation and usability within the country. While platforms such as Binance and other outside crypto entities could operate without repercussions, Dutch companies were subject to regulatory costs.
"Regulation costs a lot of money,"
says Patrick, who notes that it was unclear how much “it would cost, but an average company would pay out more than $100,000 each year.”
High regulatory costs forced companies to relocate either to Switzerland or Panama to avoid regulation. What’s more, Patrick believes hash regulation pushed crypto businesses outside the Netherlands “overplaying their hand” and requiring unreasonable compliances.
"They needed wallet verification from their customers, which meant that if a customer received Bitcoins, the company would need to ask the customer for a screenshot of their wallet to verify that the wallet actually belonged to the customer."
As Patrick notes, requirements imposed by the DNB were not needed by law. Following a court case between Bitonic (a dutch crypto exchange) and the DNB, the dutch regulatory authority was forced to change their crypto policy. Patrick notes:
"We've had a lot of companies that went through the whole regulation process, and in the end, customers left to foreigner companies like Binance",
noting that wallet verification “was not needed by law”
Given the harsh regulation, which according to reports will not change, despite the court order, only “one company that got a DNB registration can exploit BTC ATMs.”
Why You Should Care?
Industry regulation will make crypto become more accessible and used within the society but the current narrative will only make banks and regulators create frameworks that will not make existing institutions irrelevant. While crypto regulation is wanted by the mass public, banks and governments don’t want to lose control over the only control tool left.