A few more details on the proposed license for cryptocurrency companies in the Netherlands have been made public in a January 18 report from Nederlandse Omroep Stichting (NOS). The report also noted that some members of the Dutch crypto community are concerned that the proposed regulations could be too heavy on the backs of young crypto companies.
Dutch Minister of Finance Pete Hoekstra was originally advised to install an official licensing system for crypto services in December. According to the new report, Hoekstra began moving to follow the advice as soon as he received it.
The advice reportedly came as a response to a request for advice on cryptocurrencies that Hoekstra submitted to De Nederlandsche Bank the Netherlands’ Authority for the Financial Markets in early 2018.
The two government bodies may be responding to a new European Law, the fifth Anti-Money Laundering Directive. Finance Magnates reported in December that this version of the Directive is the first to mention cryptocurrency businesses in particular.
Exchanges and Wallet Providers Will Face Heavy Monitoring and Reporting Requirements
The licensing system would force cryptocurrency wallet providers and exchanges to closely monitor their users’ transactions and report any funny business (that is, suspicious activity) to the proper authorities. Because the hype surrounding the cryptocurrency markets has lessened considerably over the course of the year, the system’s primary goal will not be the prevention of speculative mania.
Instead, the system will focus on the creation of preventative measures against terrorist financing and money laundering through cryptocurrency. NOS reported that concerns surrounding these kinds of financial crimes have increased. The Netherland’s Financial Intelligence Unit found that the number of “unusual” transactions made with cryptocurrencies has increased from 300 to 5,000 a year.
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Bitcoin Nederland Foundation Member Richard Kohl: Regulations are Too Much For Young Companies
Exchanges and wallet providers would also be required to keep records of customer data to be accessed upon request by authorities who may be conducting an investigation.
In order to be granted a license, cryptocurrency companies will be tested to ensure that they are capable of fulfilling monitoring and record-keeping requirements.
While many voices in the cryptocurrency industry believe that more regulation is healthy for the industry, Bitcoin Nederland Foundation member Richard Kohl believes that the proposed licensing system is “dramatic for young companies,” and that the costs associated with creating the data storage systems that the government is asking for would crush crypto startups.
Kohl also believes that the proposed system could potentially threaten user privacy: “banks and financial institutions already need to keep track of customer and transaction information,” he explained. “You may wonder how well our personal information is protected and used, such as how the Chinese government wants to be able to follow all transactions of all citizens.”
The Netherlands Hasn’t Been Particularly Hostile Toward the Cryptocurrency Industry in the Past
The Netherlands has been involved with the cryptocurrency industry since at least 2016, when the country announced the opening of its own blockchain technology development center.
In August of 2018, De Nederlandsche Bank issued a statement on cryptocurrency, saying that while it was not illegal, it was also “not money.”
The Block reported last year that the Dutch city of Arnheim was the first in the world in terms of the ratio of Bitcoin-accepting businesses to population members. For every million people, there were 479 Bitcoin-accepting businesses; in second place was San Francisco, with 110 businesses per million people.