Dutch Central Bank Aims At Regulating Crypto Companies To Fight Money Laundering


The Dutch Central Bank will begin regulating cryptocurrency companies by instituting a requirement that obligates such businesses to get licenses before being allowed to operate.

De Nederlandsche Bank has said that the move is aimed at fighting money laundering as well as the potential use of crypto in financing terrorism.

As per a brief report published in the country’s De Telegraaf daily newspaper, crypto companies that qualify for approval have the responsibility of reporting “unusual transactions” and ensure they know their clients by adhering to know your customers (KYC) checks.

The top Dutch bank stated that the decision to have the regulation in place is necessitated by the fact that the crypto market is highly decentralized, with the anonymous nature of transactions making attractive to bad actors like money launderers.

Money laundering at crypto exchanges

The issue of money laundering is one of the major concerns financial regulators have when it comes to cryptocurrency transactions. Also making regulators leery is the use of crypto exchanges to facilitate such cases.

In September 2018, an investigation into the menace alleged that over $88 million had been laundered since 2016, with transactions occurring at more than 46 cryptocurrency exchanges spread across the globe.

One of the exchanges allegedly used in the laundering was U.S.-based ShapeShift, which was said to have processed over $9 million in illegal transactions in the last two years.

The Swiss incorporated altcoin exchange could have been an easy choice for launderers given that it initially allowed its customers to trade bitcoin anonymously. However, the exchange has since moved to tighten its checks by requiring that its customers complete a mandatory KYC requirement.

In another high-profile case, the U.S. Department of Justice indicted online sex marketplace Backpage for what was its use of cryptocurrency exchanges to facilitate the laundering of millions of dollars in BTC and other cryptocurrencies.

The DoJ eventually shut down the Backpage website in April 2018. The move followed mounting evidence which showed that the firm was actively engaged in promoting sex trafficking and underage prostitution since 2004.

In its report, the agency stated that Backpage used “bitcoin processing companies,” to carry out its money laundering activities. Among the companies the sleazy site exploited were Coinbase, Paxful, GoCoin, Kraken and Crypto Capital.

The DoJ added that Backpage used these exchanges “to receive payments from customers and/or route money through the accounts of third parties.”

Reports of illegal activity are (somehow) exaggerated

While cases of illicit use of crypto have been proven and even prosecuted, reports that crypto is prone to money laundering are sometimes overblown. In reality, fiat currencies are also very likely to be used for these activities.

In April last year, Quebec’s government published a report that concluded that bitcoin wasn’t the “go-to vehicle” when it comes to money laundering or other criminal activities.

Quebec Chief Scientist Rémi Quirion termed reports that it is as “wrong” and exaggerated. He said that bitcoin wasn’t in any way “a magnet for illicit transactions,” because “it is less attractive for anyone who wants to make transactions without leaving a trace.”

In January 2018, blockchain analytics firm Elliptic released a report from a study that showed a very tiny proportion of bitcoin transactions between 2013 and 2016 constituted money laundering.

The firm noted that most claims of illicit use of bitcoin were “mainly based on anecdotal evidence,” and did not rely on any substantial analysis of supporting data.

That aside, regulators have moved to tighten checks as concerns over scams, money laundering, fraud and terrorism financing in the crypto industry mount.

While some of these concerns are magnified via false claims, it is these same issues that continue to be the biggest hurdles against global mass adoption of cryptocurrency.

Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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