The Netherlands had a pioneering role in the creation of the modern financial system, including the formation of Europe’s first stock exchange in 1602, but has its mercantile history helped it prepare for the emergence of blockchain-based cryptoassets? What is the state of crypto regulation the Netherlands in 2019? Is it going to change anytime soon? Here’s what we know.
Cryptocurrency Legal Status and Regulations
Under current regulations, cryptocurrencies are not considered legal tender in the Netherlands. According to Petra Hielkema, divisional director of the Dutch Central Bank (DNB), they are not considered “to be money as such” – an opinion she expressed in August 2018. Nor do cryptocurrencies meet the definition of electronic money according to the Act on Financial Supervision (Wet op het financieel toezicht) of the Netherlands.
Cryptocurrencies are, however, recognized as having a transferable value in the Netherlands – as confirmed by the Court of Amsterdam in a March 2018 opinion stating that:
“Bitcoins are stand-alone value files that are delivered directly by the payer to the payee when making a payment. It follows that a bitcoin represents a value and is transferable. In the opinion of the court, this shows the characteristics of a property right. A claim for payment in bitcoin can, therefore, be regarded as a claim that qualifies for verification.”
The lack of clear legal recognition has not prevented regulators from trying to impose regulatory restraints on companies providing services within the cryptocurrency industry, especially since the European Securities and Markets Authority (ESMA) ruled that certain cryptocurrencies may be classified as financial instruments.
The latest reports of such efforts came in January 2019 when the Dutch Minister of Finance announced that work had begun on cryptocurrency regulations, following recommendations from the Netherlands’ Authority for the Financial Markets (AFM) and the DNB – institutions that he asked for advice on the matter a year earlier.
According to local media reports, if introduced the new regulations would require cryptocurrency service providers, such as exchanges, to be licenced, to collect information about their customers, and to report suspicious activities to the authorities. What form these licensing and compliance regulations will take is yet to be seen.
According to a January 2019 report by ICO rating platform ICObeach, the Netherlands occupied the 7th position on the list of top countries by funds raised via ICOs – despite AFM warnings advising consumers to avoid investing in ICOs.
In its cautionary note, the AFM pointed to the ICO model’s vulnerability to misrepresentation, fraud, and manipulation. The AFM described ICOs as unregulated and anonymous, with a high potential for use as a means of laundering illicit money.
“Because of these risks, there is a strong possibility that investors will lose their entire investment,” warns the AFM on its website.
Back in March 2018, Dutch Finance Minister Wopke Hoekstra called on the country’s parliament to work on cryptocurrency regulations in a letter that included a paragraph on ICOs:
“It is being investigated whether investors in ICOs can become just as good [sic] protected as investors with a normal IPO or bond issue. The current framework is not sufficient for this,” it read.
A few months earlier, in November 2017, the AFM issued its own statement on ICOs, referring to them as a “dangerous cocktail” of high risk, scams, loss, and hype. Despite calls for developing a regulatory framework for ICOs, they remain unregulated.
Most of the above-mentioned statements by various Dutch government agencies have one thing in common – they point to the potential of blockchain technology.
The Netherlands has seen a number of blockchain-based projects tested and launched in recent years, such as the one from Europe’s largest port, the Port of Rotterdam, which has partnered up with Samsung and major Dutch bank ABN AMRO for a pilot blockchain-based logistics program. Another example comes from the Dutch supermarket giant, Albert Heijn, who together with supplier Refresco, introduced an orange juice tracking system based in blockchain.
However, not everyone in the Netherlands is enthusiastic about blockchain. The country’s central bank (DNB) announced in a report dated June 7, 2018, that the technology is not ready for implementation in financial markets due to a lack of efficiency in regards to energy use, cost, and the handling of large numbers of transactions. The report was a conclusion of three years of tests. Nevertheless, the mere fact that the central bank is committed to testing blockchain technology is a positive sign.
Another positive development in the Netherland’s blockchain sphere is the Ministry of Finance’s 2018 entrance to the Dutch Blockchain Coalition (DBC) – a partnership of industry, government, and scientific institutions, aimed at researching the potential benefits and risks of blockchain technology. According to a DBC press release, the finance ministry, the fifth government agency to join the coalition, will work on the “Compliance by Design” strategy within the coalition.
Further emphasizing the Dutch government’s keen interest in blockchain is its support for Odyssey – an event to be held in April 2019, in the Dutch city of Groningen, described as the “world’s biggest blockchain and AI hackathon”.
“New technologies and opportunities, such as blockchain, data-driven policymaking, and artificial intelligence can help improve government service provision. This requires experimentation and the Odyssey Hackathon is a place where this happens,” Raymond Knops, State Secretary for the Interior and Kingdom Relations of the Netherlands told Forbes.