This heightened calls for regulation to maximise crypto's advantages while minimising financial crime and risks to investors and market integrity. The International Organisation of Securities Commissions (IOSCO) opened consultation on proposed recommendations for the regulation of crypto-assets in May 2023. Meanwhile, several countries have, or plan, rules affecting crypto-finance, but their approaches vary. Various EU directives concern crypto, so differences also arise when member states transpose them into national law.
The Markets in Crypto-Assets Regulation (MiCA), which introduces an EU regime for crypto-assets and related services, is expected to come into force in 2024. How national regulators use their powers under MiCA may produce differences between member states.
This article provides an outline of EU legislation followed by an overview of crypto-asset regulation in the Netherlands by Marinus de Waal and Luuk Wieringh of Fieldfisher.
Principal existing EU legislation:
Money Laundering Directives EU 2015/849 and EU 2018/843
The Fifth Money Laundering Directive (5MLD) extended the Fourth Money Laundering Directive (4MLD) regime to "providers engaged in exchange services between virtual and fiat currencies" and to "custodian wallet providers".
In July 2021, the European Commission proposed replacing 4MLD with a package of new anti-money laundering (AML) and counter financing of terrorism (CFT) rules. The package includes an AML/CFT regulation and a Sixth Money Laundering Directive (6MLD). It was still awaiting EU Parliamentary first reading on May 1, 2023.
Second Electronic Money Directive EU 2009/110 (EMD2)
Article 2(2) of EMD2 defines electronic money as "electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions … and which is accepted by a natural or legal person other than the electronic money issuer".
Some stablecoins can be "electronic money tokens" under this definition.
Revised Markets in Financial Instruments Directive EU 2014/65 (MiFID 2)
Some crypto-assets qualify as "financial instruments" under MiFID 2, art 4(1) point 15 and the associated list in section C of annex 1.
The MiCA regulation (COM 2020/593)
MiCA was approved by the European Parliament on April 20, 2023 and is expected to be published in the Official Journal in June, with some provisions on stablecoins taking effect in mid-2024 and others in early 2025. It will apply to persons engaged in the issuance or provision of services related to crypto-assets not within scope of existing EU regulation.
MiCA distinguishes between stablecoins and other crypto-assets. Stablecoins are divided into "asset-referenced tokens" and "electronic money tokens". Any that pass threshold conditions would be classified as "significant" by the European Banking Authority (EBA).
The proposed revised Transfer of Funds Regulation (TFR) COM (2021) 422
The European Parliament also voted in favour of the TFR on April 20, 2023 and it may take effect from 2024, like MiCA. It will recast current rules in regulation EU 2015/847.
TFR will harmonise rules in the EU by extending the "travel rule" applicable in traditional finance to crypto-assets. This means information on the source of an asset and its beneficial ownership will have to "travel" with a transaction and be stored on both sides of a transfer.
Crypto-asset regulation in the Netherlands
1. Which body or bodies regulate crypto-assets and related services in the Netherlands?
There is no specific body in the Netherlands assigned to the supervision of crypto-assets per se. Following the implementation of Directive (EU) 2018/843 in Dutch law, the Dutch National Bank (De Nederlandsche Bank (DNB)), however, has a supervisory role (integrity supervision) in relation to certain crypto services.
Providers offering exchange services involving virtual and fiduciary currencies as well as providers of custodian wallets (crypto providers) need to register with the DNB if they operating in or from the Netherlands.
When enrolling in the register, providers must deliver certain information to the DNB. Please see the information provided under question 5 for more information about specific requirements.
2. Has any regulator or finance ministry stated its attitude toward crypto-assets: for example, said it wants to encourage crypto ventures or warned the public against investing in them?
Yes, both regulators and the finance ministry have.
Regulators: The Netherlands has a twin peaks model of financial supervision with split responsibilities between the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten (AFM)) and the DNB. The AFM carries out conduct of business supervision and DNB prudential supervision.
The AFM and the DNB inform and warn consumers about the risks of crypo-assets. They have published several articles on their websites about crypto and the accompanying risks.
Finance ministry: The Dutch Ministry of Finance runs a media campaign on the risks associated with crypto-assets. The campaign targets people between the ages of 13 and 25 and aims to create awareness about the pitfalls of crypto-assets. The finance ministry publishes videos on popular social media platforms such as YouTube and Snapchat. In addition to this, the ministry has launched a website with frequently asked questions about crypto-assets.
The finance ministry specifically warns about "crypto-influencers" as they, in the view of the finance ministry, often fail adequately to address the risks associated with crypto-assets.
3. Does any non-EU derived law regulate crypto-assets or service providers such as exchanges or digital wallets?
There are no non-EU derived rules that specifically apply to crypto exchanges or digital wallets in the Netherlands.
4. What rules apply to the promotion of crypto-assets, and are others proposed?
There are no non-EU derived rules that specifically apply to the promotion of crypto-assets.
Although crypto-assets are not regulated per se, they could qualify as financial products under Dutch law. This depends on the characteristics of the crypto-assets. If the crypto-assets qualify as financial products, regulatory requirements apply, including rules on promotion. These guidelines emphasise the importance of fair, clear and not misleading information in promotional materials and advertisements. An example of such a promotional rule is the obligation to provide customers with information about the risks which accompany crypto-assets.
The Markets in Financial Instruments Directive II (MiFID II) potentially applies to the promotion of crypto-assets in the Netherlands. This directive regulates the marketing and sale of financial instruments, including certain types of crypto-assets that are classified as financial instruments.
Furthermore, there are general rules on promotion (for example, a prohibition on misleading advertising) that crypto providers need to take into account. A consumer recently brought a case to the Dutch Advertising Commission regarding a misleading crypto advertisement. The plaintiff acquired the advertised crypto-assets, after which their value plunged. In the plaintiff's view, the advertisement was misleading. The advertising commission confirmed this view based on the analysis of the expected growth of the crypto-asset and the lack of an explicit warning of the risks involved.
5. What anti-money laundering requirements apply to crypto-asset transactions or custody?
Providers offering exchange services involving virtual and fiduciary currencies as well as providers of custodian wallets (crypto providers) are within in scope of the Dutch anti-money laundering rules.
Crypto providers need to register with the DNB if they operating in or from the Netherlands. Crypto providers have to:
• assess and understand the risks of money laundering and terrorist financing by taking into account risk factors, such as specific types of customers, products, services, transactions, supply channel and countries or geographic origin;
• have policies in place to demonstrate compliance with the requirements of the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act;
• conduct customer due diligence and monitor customers;
• monitor transactions and have a system to identify suspicious or unusual transactions;
• report unusual crypto exchange transactions and custodian wallet transactions to the Dutch Financial Intelligence Unit if there are suspicions of money laundering or financing of terrorism6; and
• retain transaction data for at least five years, including customer identification documents and correspondence.
The list shown above is non-exhaustive.
6. Does any existing or proposed national law impose requirements regarding stablecoin?
There are as yet no (proposed) non-EU derived rules that specifically impose requirements regarding stablecoins. Depending on the characteristics of the stablecoin, a stablecoin may be regarded a financial product under Dutch law. For instance, if the stablecoin has the same characteristics as a negotiable security or electronic money, then specific rules apply. It must be assessed on a case-bycase basis whether a stablecoin qualifies as a financial product.
In the absence of specific stablecoin regulations in the Netherlands, existing financial regulations and guidelines may be applicable depending on the characteristics and activities related to stablecoins.
These regulations may include:
• Payment Services Directive (PSD2): If a stablecoin falls within the definition of electronic money (e-money) under PSD2, the issuer may need to obtain an e-money licence from the Dutch Central Bank (DNB) and comply with relevant requirements for electronic money institutions.
• Anti-money laundering and counter-terrorist financing (AML/CFT): Stablecoin issuers and service providers may be subject to AML/ CFT regulations, including customer due diligence, transaction monitoring and reporting suspicious activities, to prevent money laundering and terrorist financing.
• Securities regulations: If a stablecoin is considered a security under Dutch law, it may be subject to existing securities regulations. The offering and trading of securities typically require compliance with prospectus requirements and other securities laws administered by the AFM.
7. Do any other rules apply to banks holding or dealing in crypto, or to crypto derivatives?
There are as yet no (proposed) non-EU-derived rules that specifically apply to banks holding or dealing in crypto, or to crypto derivatives. Depending on the nature of such activities, they could, however, be in scope of other rules. Crypto or crypto derivatives could, for example, qualify as a financial product and be in scope of Dutch financial supervisory laws. Activities in relation to crypto arrangements could also be in scope of more general rules — marketing activities are an example of this. In addition, activities in relation to crypto-assets might also trigger a special duty of care when retail clients are involved.
8. Do any current or proposed rules apply to decentralised finance (DeFi) arrangements?
There are as yet no (proposed) non-EU-derived rules that specifically govern DeFi arrangements. Depending on the characteristics of the DeFi arrangement, however, such arrangements could be in scope of other rules. A DeFi arrangement could, for example, qualify as financial product and be in scope of Dutch financial supervisory laws. Activities in relation to DeFi arrangements could also be in scope of more general rules — here too, marketing activities are an example of this.
This article was first published on Thomson Reuters Regulatory Intelligence.
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