Dutch Bitcoin Companies Face Millions in “Unusual” AML Fees

As each member of the European Union turns the fifth anti-money laundering directive (AMLD5) into law, some member states are going above and beyond what has been recommended. In Holland, for instance, the Ministry of Finance has added a series of abnormal and costly amendments for Dutch Bitcoin companies. 

If passed, it could wipe out crypto innovation in the Netherlands.

Privacy advocates and small businesses alike have intensely criticized the AMLD5. In Holland, these two voices have been particularly vocal.

Simplecoin, a Dutch mining outfit, shuttered its operations in January 2020 due to the overly-rigorous KYC processes. Deribit, a popular crypto derivatives exchange, has left Holland for the same reasons. In a note to users, the exchange wrote:

“The focus of the new regulatory framework is to improve transparency. However, this is done by almost fully sacrificing any privacy of cryptocurrency holders.”

The team has since relocated to Panama, a jurisdiction with notably more lenient regulations. But if the FSB’s latest recommendation to ban stablecoins comes to pass, countries like Panama won’t be much help. 

If not for the strict identity requirements, smaller firms cannot afford to follow the new regulations. CoinGarden, which offered mining and point-of-sale services, has had to merge with BitMyMoney, a much larger business, due to the additional administrative costs. 

At that time, these costs had been difficult to calculate accurately. 

It has now become much clearer that Dutch Bitcoin companies will have to pay much more than was expected. 

Patrick van der Meijde, a founder of Bitkassa, which helps users move between Bitcoin and fiat, told Crypto Briefing that 50 Dutch crypto companies would collectively bear €1.7 million (~$1.8 million) in additional fees. “They have said that they will make larger companies pay more, but it is unclear how this will happen,” said Van der Meijde. 

Bitkassa only employs three people, but it has played an essential role in the Dutch crypto community. 

Beyond helping users buy Bitcoin, Van der Meijde and his team established Arnhem Bitcoin City. “We let bars and restaurants, whoever really, accept Bitcoin for Euros,” he said. This business earns them less than their broker services, however. 

If the latest regulations become law, authorities would expect Bitkassa to pay €34,000 per year to stay in compliance. This fee is higher than the costs that traditional trust and credit card companies will have to pay. 

More importantly, paying this sum would likely spell the end of Van der Meijde’s business.

“There is no problem with paying for the base layer to remain compliant. It’s typical KYC regulations,” Van der Meijde said. “But this additional supervisory status is too expensive for us.”

Before the Coronavirus, politicians held discussions around these additional costs in Holland’s first chamber. This is roughly the equivalent to the United States Senate and is the final step before proposals become law. 

Officials claim that they continue to debate the measures over email, but progress is unclear. 

These issues have returned to headlines due to the investigative work of one Frank ‘t Hart of Hart Advocaten.

The Amsterdam-based law firm represents entities within the financial services industry and includes banks, insurance companies, and Dutch Bitcoin businesses. It was thanks to, among other things, Hart that the community became aware of how the Ministry of Finance was presenting these new laws to the Dutch Parliament.

“When looking at these new laws, we have to ask if they are really in line with the [AMLD5],” he said. This distinction is important; if the new laws go beyond the minimum requirements, they could be qualified as overreach.

When the Ministry of Finance first presented his proposal, he explained that crypto businesses in Holland would need to apply for a license. Such a license comes with a lot of baggage. 

Outside of the additional requirements, the Ministry of Finance also appointed the Dutch central bank (DNB) as a supervisory authority. DNB is used to supervise licensed and not registered companies. 

The proposed budget indicates that the DNB will investigate and monitor crypto companies as if they were subject to a licensing regime, and that is not the case.

“This is much more than what the [AMLD5] has indicated,” said Hart. “This envisaged way of supervision is unusual.”

Simon Lelieveldt, a Dutch banking and payments expert, told Crypto Briefing:

“We can now officially confirm that the Dutch supervisor, DNB, is going all out (and over the top) in their approach to crypto. The Dutch Association of Bitcoin Companies is now sending out urgent communications to all involved, in particular the Senate Commission on Finance, outlining that performing supervision with an intensity that exceeds trust offices and credit card companies is not really a risk-based approach.”

These constraints also come at a time when the European economy battles an ongoing Coronavirus pandemic. The crypto sector in Holland and abroad has remained relatively unscathed. 

But with companies like Bitkassa likely unable to afford the excessive costs of compliance, this could change.

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