BitcoinPolitics

Dutch Bitcoin Exchange Looks For "Legal Verdict" With New AML Measures

The Dutch central bank (DNB) recently imposed stringent anti-money laundering (AML) restrictions on Dutch exchange Bitonic, as made public by the company itself. Now the firm is fighting back.

Bitonic, which describes itself as the "first Dutch Bitcoin company," revealed last week that the DNB has mandated the introduction of a new verification measure for users. The measure will require users wanting to withdraw bitcoin to externally-owned addresses to verify they actually own the address.  Ways to prove ownership include screenshotting your wallet or signing a message with the private keys pertaining to an address. 

"From now on, we are required to ask additional details such as the purpose with which you intend to purchase Bitcoins and what kind of wallet you use. Furthermore, we are obligated to verify that you are the legitimate owner of the given bitcoin address by requesting you to upload a screenshot from your wallet, or by signing a message."

Bitonic alleges that the mandate of "whitelisting and verification of bitcoin addresses is "illegitimate, disproportionate and ineffective" that only provides a "false sense of security." It hopes to entertain a judge with the matter so that they may potentially find the ruling by the DNB to be illegal.  

Bitonic asserts that they are implementing this measure because they are mandated to. "We have repeatedly pleaded DNB to drop this requirement as we find this measure to be ineffective and disproportionate," the exchange wrote. The DNB is purportedly of the opinion that such a measure "finds its origin in the Sanctions Act," though Bitonic says this makes little sense because "Bitcoin does not work on the basis of identities."

The Netherlands is currently the only country in the West where this measure has been demanded by financial regulators.

It is currently unclear if other exchanges that operate in the Netherlands will be mandated to implement this measure.

The DNB directive pertaining to this measure, published on September 23rd, says that "providers of crypto services" must "adequately" assess any party involved in a cryptocurrency transaction. 

The directive notably does not "stipulate a specific procedure for verification."

Bitonic announced on November 19th that it will be pursuing an "independent legal verdict":

We will put our objections on this issue forward for evaluation by an independent judge, so that a proper assessments of its legality and proportionality will be obtained. To be continued.

Just the Start 

While the Dutch Central Bank is the first central bank to take such drastic measures, more stringent regulation is expected across the globe.

The implementation of this new measure appears to be related to the Travel Rule, a rule imposed on financial service providers, including cryptocurrency exchanges, by the Financial Action Task Force. 

The Travel Rule states that all intermediary financial institutions must share customer information with each other for transactions over a certain value. The value in the U.S. is $3,000, though there recently have been moves to decrease the threshold to $250 by the U.S. Treasury and the Federal Reserve. 

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Nick is a writer and analyst who has been following Bitcoin since 2013. When he is not writing, he works on HTC's Bitcoin phone, EXODUS.