The Dutch financial regulatory authority is maintaining its tough stance on the digital assets sector, despite the newly enacted EU rules for crypto service providers. The Chair of the Dutch Authority for the Financial Markets (AFM), Laura van Geest, highlighted the risks of cryptocurrencies in an editorial for the business daily Het Financieele Dagblad. Van Geest did concede that a total ban on cryptocurrencies was almost impossible, but she confirmed that the regulator wouldn’t loosen its protective measures. The AFM head also said that the EU MiCA legislation, which provided new rules for cryptocurrency service providers to operate in the common market, has less strict conditions for cryptocurrencies than those of existing financial products. The agency’s official position is that the value of cryptocurrency is often based on speculation, and their inherent vulnerability to deception, fraud and manipulation poses risks to investors.
A total cryptocurrency ban isn’t feasible
The majority of western countries have initiated regulations aimed at cryptocurrency service providers to check the potential abuse of digital assets. Despite such ripostes, a complete ban on cryptocurrencies is improbable due to their growing acceptance among investors. Validating this stance, Van Geest stated that most western countries, including the Netherlands, were tightening their regulatory policies to protect consumers, but a total ban is “difficult to imagine.” However, the Dutch regulator emphasised that crypto assets have many flaws, including being difficult to ascertain and susceptible to deception, fraud and manipulation. Similar to two million Dutch investors, Van Geest estimates that the sector’s links to the traditional financial sector remain limited.
Crypto regulations should remain strict
Regulators in the Netherlands have reiterated that they’ll maintain their strict stance towards the digital assets sector. The new EU MiCA law, implemented in 2020, seeks to regulate cryptocurrency markets by providing rules for crypto service providers throughout the European bloc. The Netherlands adhered to the regulations, but the legislation has less strict conditions for cryptocurrencies than other financial products. Nonetheless, the AFM stated it would not lower its regulatory level to compete with the licensing provisions of other European countries. The agency says that the strict supervision of crypto service providers ultimately erases doubts among consumers and helps support the Dutch financial ecosystem. The country is willing to lose out on potential client inflow from other jurisdictions if it means maintaining their strict supervisory protocols.
Cryptocurrency warnings remain relevant
Cryptocurrencies have many shortcomings that regulators have previously warned cryptocurrency investors and traders about. The industry’s high volatility and speculative nature have always been potential downsides. In her editorial, Van Geest highlighted the risks to investors in cryptocurrencies, especially regarding their susceptibility to fraud and deception. Laura van Geest warned that while cryptocurrencies may not completely collapse, investors will continue to see high volatility and risk when investing in them. Van Geest also emphasised that the Netherlands is adhering to these strict regulatory protocols despite the possibility that some businesses may prefer to base themselves in other jurisdictions with more lenient requirements.
Final thoughts
While the Netherlands has adopted EU MiCA regulations, the AFM has indicated that it won’t relax its supervisory protocols to keep pace with rules adopted by other European countries. The head of the AFM recognises the risks of not supervising the digital assets sector properly and the potential consequences of failing to enforce strict regulations. She reasoned that strict supervision erased doubts among consumers and helped support the Dutch financial system. The Netherlands is willing to lose out on potential economic and financial gains from the sector but not to the detriment of protecting the rights of consumers.
