The Netherlands’ AMLD5 Interpretation Appears to Be Killing Crypto Firms
28 Apr 2020

The Dutch crypto market is seeing the first of most likely many small crypto exchanges get squeezed out following the passage of heavily criticized anti-money laundering (AMLD5) regulations.

Announced Friday in a company blog, Bittr founder Ruben Waterman said his bitcoin exchange, launched in 2018, will shut down by April 28 as the one-man operation does not have the capital to meet the new regulations. The Dutch National Bank (DNB) estimates that registration alone costs $36,500, in addition to rolling compliance needs.

The development shows what Dutch regulators expect of financial upstarts and could speak to future hurdles to cryptocurrency development in the greater European Union.

“Above all, Bittr would have to appoint a dedicated compliance officer who’s responsible for compliance with the new regulations,” Ruben wrote Friday. “Who can I appoint? Myself? That probably doesn’t work also being the sole shareholder and director.”

Under Dutch law, businesses pay for their own regulations out of pocket. Ruben said the options for his bitcoin savings platform included keeping a lawyer on retainer, paying a compliance officer or finding a third party to manage compliance costs in addition to the government registration fee – impossible, he said, given the firm’s small size.

Making sense of it all

As CoinDesk reported in December, Dutch cryptocurrency firms were entangled in a protracted battle of semantics with the DNB and Ministry of Finance (FIN) over the implementation of the European Union’s 5th Anti-Money Laundering Directive (AMLD5), which went into effect in January 2020.

Bitcoin firms CoinDesk spoke with said the DNB and FIN were strengthening the EU directive needlessly while using doublespeak with the Dutch Parliament. The firms alleged the financial regulators had created a de facto licensing regime whereas AMLD5 calls for mere registration of cryptocurrency firms. These allegations were further supported by the Dutch Council of State, a governmental advisory board widely respected in the country, which asked the finance agencies to clarify their proposals.

Members of the Dutch Parliament held two competing priorities in mind: fighting money laundering and supporting the nation’s fintech firms.

In a Parliamentary report from April 21, Dutch Senator Bastiaan van Apeldoorn said it’s unlikely cryptocurrencies are being used on the same scale as cash for money laundering, but they still require supervision.

Finding a soft regulatory touch that wouldn’t displace small players in the market remained the goal, he said.

“The cryptocurrency phenomenon does exist and is likely to take on even larger, if not different, forms in the future. It is therefore good that this is also adequately regulated with regard to money laundering,” van Apeldoorn said. (Editor’s note: This report was translated.)

The legislation was tied up on the point for months, even though the EU called for the directive to go into effect on Jan. 10. Legislation was finally adopted last Tuesday, although opinions on its outcome differ.

By William Foxley, CoinDesk, 27 April 2020

Read more at CoinDesk

RiskScreen: Eliminating Financial Crime with Smart Technology

Count this content towards your CPD minutes, by signing up to our CPD Wallet