The Dutch authorities have called for a national licensing regime for crypto exchange platforms and crypto wallet providers to ensure more effective prevention of money laundering and terrorist financing.

A joint statement from De Nederlandsche Bank (DNB) and the Authority for the Financial Markets (AFM) said that the European regulatory framework for corporate funding must be amended to enable blockchain-based development of small-scale corporate funding.

The Dutch Minister of Finance passed the recommendations on to the country’s House of Representatives last week.

“Cryptos are vulnerable to financial crime, which is why the AFM and DNB recommend introducing a licensing regime under the Dutch Anti-money Laundering and Anti-Terrorist Financing Act,” read the statement. “A licensing regime will allow preventative assessment - and rejection - of potential market parties.”

The AFM and DNB accepted that blockchain technology may open up opportunities for the funding of small-scale business activities, provided the crypto assets represent clear and enforceable rights, as is the case with traditional instruments like equities and bonds.

“Consumers will always be exposed to risks, and given the cross-border nature of cryptos, additional national regulations aimed at consumer protection can only be effective if they are coordinated at an international level,” the statement stressed.

At a national level, the AFM and DNB recommended bringing the Dutch definition of a security in line with the broader definition used in European legislation.

The Dutch authorities have repeatedly warned about the risks of deception, fraud, manipulation and cybercrime associated with cryptocurrencies and initial coin offerings (ICOs).

“Now that the popularity of cryptos has seen a sharp decline, the need to set up a national regulatory framework has also decreased,” they stated. “However, the supervisory authorities will continue to monitor developments in the crypto markets and promote consumer awareness of the risks associated with cryptos.”

Last summer, DNB concluded that for the time being, blockchain technology cannot meet the high demands of a financial market infrastructure. This was the finding from its project Dukaton experiments over the last three years.

“The biggest shortcomings are inadequate capacity, inefficiency due to high energy consumption and lack of complete certainty about having paid a payment,” read a statement. “Nonetheless, it appears that the resilience of a financial market infrastructure against external attacks could be increased by the use of blockchain technology, but this is at the expense of capacity and efficiency.”

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