New AML/KYC Regulations Coming to Dutch Crypto Exchanges and Wallets

Colin Muller

A new regime of European Union (EU) banking regulations that extend to cryptoasset exchanges and wallets has been proposed as draft regulation in the Netherlands, and may become Dutch law in Q1 of 2019. What will eventually be EU-wide regulations are the fifth iteration/update to the bloc’s “Directive,” aimed at detecting and preventing money laundering and terrorist financing through Eurozone financial entities.

According to the legal blog Regulation Tomorrow, the updated policies of the directive pursue more transparency and availability of ownership registers to EU authorities; less possibility of anonymous transactions EU-wide; more scrutiny of transactions to/from certain specified countries with weak anti-money laundering (AML) or antiterrorism standards, or otherwise opaque ownership registering practices; a centralized banking register for all eurozone banks; “enhancing the powers of EU Financial Intelligence Units” and more cooperation between EU financial authorities.

Crypto In AML Directive’s Sights

The changes are notable intheir own right regarding the tension between privacy and security in the EU. The final critical change brought by the directive update however, is the new applicability of all of the above to all cryptoasset custodial services, be they exchanges or wallets. Any “digital representation” that can be “transferred, stored and traded electronically” will now fall under the directive.

This may mean that EU-based cryptoasset services exchanges to increasingly impose AML and know-your-customer (KYC) identity requirements on all customers, if they have not already, in the lead up to the January 2020 deadline for the Directive’s implementation. CryptoGlobe only yesterday reported on one such instance, presumably anticipating the directive's requirements.

A recent and extensive report on the use of cryptoassets for criminal activities, compiled for the European Parliament (EP), estimates that virtual assets are “misused” for over seven billion euros worth of transactions - although this figure looks paltry next to a 2015 FBI assessment, which said that $300 billion worth is laundered every year just in the US.

The EP report stated that “AMLD5's definition of virtual currencies is sufficient to combat money laundering, terrorist financing and tax evasion via cryptocurrencies.”