Crypto company to court over ‘extra’ DNB supervision requirement

October 24, 2021 by No Comments

Crypto company Bitonic is going to court because the company does not agree with one of the conditions of De Nederlandsche Bank (DNB) to get a crypto registration in the Netherlands. The company announced this on Tuesday.

For companies such as Bitonic, which store crypto coins for customers or exchange them for euros, for example, registration with DNB has been mandatory since last year. In order to qualify for registration, companies must take all kinds of measures to prevent money laundering. The crypto companies are also obliged to comply with the Sanctions Act. That law requires financial institutions to check whether the recipient and sender of a transaction are on international sanctions lists. Those lists include, for example, persons and organizations involved in terrorism. If the sender or receiver is on such a list, the transaction must be blocked.

Bitonic believes that DNB is much stricter in the application of the sanction rules for crypto companies than for other financial institutions. In order to be registered by DNB, crypto companies are obliged not only to keep the name of the recipient of a transaction on the sanctions lists, but also to check whether the counterparty is really who it says it is. Bitonic believes that this requirement is wrongly imposed only on crypto companies, does not stem from the Sanctions Act and, moreover, was made clear to crypto companies only late.

principle of equality

Maud Bökkerink, a former DNB employee who now advises on anti-money laundering rules, endorses this lecture. In a by NRC In the analysis, requested by Bitonic, she further writes that crypto companies should meet the same requirements as, for example, banks: “From the principle of equality, providers of crypto services should be able to suffice with checking with the client about the owner of the wallet to which the cryptos go. and then check the specified details of this person.”

Bitonic has been registered by DNB since November 17, after it introduced additional checks “under protest” to comply with the rules. “This has forced us to operate in a way that violates privacy rules for a long time now,” Bitonic said. Because, according to the bitcoin company, DNB has not yet officially responded to a letter about this from 25 crypto companies in early November, the company has now asked the court in Rotterdam to suspend DNB’s additional demand. It is not yet known when the summary proceedings will take place.

DNB has stated in a response that it has taken note of the legal procedure. The regulator does not want to comment further on this specific case, because it is now before the court. “In general, I can say that we have communicated extensively with the companies about the requirements for registration, in newsletters and during an information meeting in September,” a spokesperson said.

License or not

The Dutch crypto industry has been dissatisfied with the registration system for months. Because of the alleged extra requirement, but also because due to the heavy testing in advance, there would actually be a licensing system. The Dutch government had previously refrained from doing so, because a license obligation for crypto companies is in conflict with European guidelines. Only 15 of the 56 parties that applied have been registered so far.

Bitcoin and other crypto coins are not only under the magnifying glass of regulators in the Netherlands. Due to its cross-border nature and the – until now – poor supervision, it is suspected that the currency is widely used by criminals to move and launder their assets. The US recently announced that it wants to introduce similar rules as the Netherlands, although their implementation has been frozen for the time being by the new president Joe Biden.