In the summer of 2018, the European legislator agreed on the 5th Anti-Money Laundering Directive (Directive 2018/843 – AMLD5). EU Member States are required to transpose the AMLD5 into national law by 10 January 2020. See also our earlier newsletters on the AMLD5 here (general information) and here (focus on crypto currencies).
The Dutch legislator published a draft legislative proposal implementing the AMLD5 into Dutch law for consultation (https://www.internetconsultatie.nl/wijzigingamld4) on 11 December 2018. Market parties can submit their views until 15 January 2019.
One aspect of the draft proposal stands out which is expected to impact the crypto currency market in the Netherlands significantly. The AMLD5 introduces the requirement for platforms for the exchange of virtual currency to fiat currencies (crypto currency exchanges) and providers of electronic wallets for virtual currencies (crypto wallet providers) to comply with the anti-money laundering measures provided for in the AMLDs. Additionally, the Directive requires the providers to register with the financial supervisory authorities. However, in its draft legislative proposal, the Dutch legislator 'upgrades' this registration requirement into a licence requirement. In other words, to access the Dutch market, crypto currency exchanges and crypto wallet providers will have to apply for a licence from the Dutch Central Bank (DCB), if this draft legislative proposal will be implemented as it currently stands. The licence requirement will apply to crypto currency exchanges and crypto wallet providers that (intend to) offer their services in the Netherlands, which includes cross-border services.
The explanatory notes to the draft proposal state that the requirements applicable to such licence are limited to the safeguarding of the anti-money laundering measures provided for in the Dutch anti-money laundering legislation. Thus when assessing a licence application, the DCB will only verify if the crypto currency exchange or crypto wallet provider has implemented sufficient and adequate processes and measures to comply with the anti-money laundering legislation. If not, the DCB will in principle not grant a licence and the relevant applicant will not be allowed to offer its services in the Netherlands.
In line with the AMLD5, the DCB will also assess the reliability and the fitness of the people holding senior management positions or supervisory positions at a crypto currency exchange or crypto wallet provider.
The crypto currency market has long been attractive due to its inherent anonymity and low levels of regulation. With the adoption of the AMLD5 and initiating the monitoring of the use of virtual currencies, the European legislator intends to provide for a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship. This is already expected to have quite an impact on the crypto currency market, removing the anonymity out of the equation. One may question whether the additional licence requirement that the Dutch legislator intends to introduce on top of that, could still be considered such balanced and proportional approach.
Our team of financial regulatory and Blockchain experts is more than happy to answer any questions you may have about the AMLD5.