Dutch Central Bank increases flexibility towards crypto-service providers

Crypto-service providers must comply with less stringent rules than previously required by the Dutch Central Bank (DNB), which has revoked the requirement for crypto-service providers to check the identity of customers for each transaction.

This change was noted after recent adjustments to the DNB website regarding crypto registration, which likely resulted from legal proceedings initiated by the crypto-service provider Bitonic. 

Sanctions Act compliance

DNB's premise for crypto registration was compliance with the Sanctions Act, which required crypto-service providers to verify the identity and place of residence of the counterparty for each transaction. This included transactions in which the customer sends or receives cryptocurrency to or from their own wallet in which case the provider was required to establish that this person was the actual recipient or sender.

Bitonic argued that DNB's application of the Sanctions Act was too strict, objected to the fact that DNB required an extensive check of every transaction and brought the case to court. 

DNB revokes decision

On 7 April 2021, the court decided that the rules DNB applied were indeed too stringent for the crypto industry, and gave the regulator six weeks to review the registration requirements. 

After a reassessment, it appears that DNB had to adjust its interpretation of the Sanctions Act, declared Bitonic's objection well founded and revoked its initial decision. It seems that DNB incorrectly set the verification requirement as a condition for registration and needs to amend the regulations for all crypto service providers.

As a result, Crypto-service providers must no longer require their customers to prove their identity with every transaction. Companies must screen transactions, but are allowed to assess for themselves which transactions impose a high risk, such as money laundering. If the customer is deemed to be lower risk after an initial extensive check, it will no longer be necessary to conduct the same intensive check for each transaction as previously required.

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