Update: 8 September, 2021
Note: It is not a ”crypto license”, but a ”registration requirement”.
Exchanges are all virtual currency trading companies, brokerages and intermediaries that buy- and/or sell cryptocurrency to clients. Such as Bitstamp, Kraken, Bitonic and other similar exchanges.
Regulatory situation in the Netherlands before 21st November 2020
Before the new rule came into effect on 21st November 2020, crypto exchanges and wallet providers in the Netherlands did not require any registration or licensing from the central bank.
Although it was still highly recommended, and necessary to follow well-structured know-your-customer and anti money laundering practices as broker, buy or sell cryptocurrency. Only recently it became an official requirement in The Netherlands.
What do the regulation mean for the practical onboarding process?
Wallet custodians and virtual currency trading companies need to identify their clients and manage the risk of money laundering by monitoring and reporting suspicious transactions.
The client identification process will be comparable to what some regulated Western crypto exchanges currently already ask from their clients, a copy of passport, a passport selfie, a proof of address, some declarations or proof as to the source of your income, and to declare what type of transactions you will have and for what reason. Depending on the limits you want to unlock. A practical guideline for this can be crafted.
Some exchanges solve this by using new digital onboarding solutions to be able to quickly accept the clients. Clients can be identified by a live video conference in which the passport is checked by a compliance employee and compared to the person holding it. And so the identify of the client is confirmed. For higher limits of trade, additional documents may be requested.
Some exchanges require the client to upload documents until they are inspected by a compliance staff member. During certain busy periods in the crypto market, the onboarding time may take up to 2 weeks for some exchanges.
Quick summary of requirements proposed for registration with the Dutch Central Bank:
- Fill in a notification form of your activity
- Send all company legal documents, identification and resumes of owners
- Send a business plan and compliance manual
- To have managers / directors of demonstrable integrity and suitability
- To have a transparent company structure
- The regulator will monitor and test the integrity and may suspend the registration
For the full list please consult this document, page 19-20 for a shortlist.
Compliance requirements (at least):
- To have a compliance procedure for identification and monitoring of clients
- To report unusual transactions
- To have compliance staff follow an annual training
- To make a industry based risk profile to identify higher-risk clients and transactions
- To identify clients and ensure their funds are of legal origin
The process is relatively straight forward and should have a high succes rate in case all documents and files will be supplied properly.
The Dutch Central Bank has shared an application form for registration, as well as an indication of the registration fees, €5000 for a new company.
The Central Bank will charge the total costs of supervision to the entire applicable crypto industry in the Netherlands. This means a total cost of €29.850 per year per crypto licensed company. The Central Bank in this case can be likened to a Financial Regulator such as the Security and Exchange Commission.
The greatest criticism from the crypto industry is that the current proposal would likely work in favor of larger exchanges, and in the disfavor of smaller exchanges. The smaller exchanges might not be able to cope with all additional registration and compliance costs.
FAQ about the Crypto registration
- What if I open a crypto company that is not a trading or exchange firm?
If you do not trade, exchange crypto for (fiat) money or hold customer funds, you are likely not regulated.
- What is the timeline of a registration with the Dutch Central bank if I want to start an exchange or crypto broker in The Netherlands?
We cannot predict the processing time by the government body. But generally the whole process can take between 6 and 12 months.
- If I have a company like Shapeshift or a Decentralized exchange, do I need to be regulated?
Currently there is no requirement for regulation if you only trade virtual currencies for virtual currencies. (Dutch Central Bank Link)
- Do you have experience with these requests?
Because Intercompany Solutions specializes in corporate law, we collaborate with a specialized law firm for the crypto license applications. Our firm can assist with all matters up to the point of application, such as: incorporation of the firm, advise on the documentation and assistance with the compliance and accounting requirements.
How can Intercompany Solutions assist your crypto company?
We have years of experience in the cryptocurrency industry and we have advised and assisted (large) foreign crypto firms in setting up a cryptocurrency company in the Netherlands. We can assist you with all practical procedures and regulatory information to make your crypto business in the Netherlands successful.
We can also assist you with:
1. Formation of the company and all requirements
2. The application for the crypto license (This part is handled by a specialized Financial law partner firm).
3. Assistance in drafting a compliance and AML policy as is required for the crypto license
4. Assistance with drafting and organizing the internal documentation, business plan and registration requirements
5. Provide you with a consultation from one of our financial lawyers
1. Virtual currency and fifth anti money laundering directive Link
2. Law came into effect on 10 November 2020 Link