26th June 2022 > > The Netherlands.

tl;dr

The Netherlands is trying to “ban” BTC with onerous and unjustified regulation.

Market Snap (at time of writing)

Market Wrap

Though perpetual futures funding rates remain firmly anchored in neutral territory, we are seeing a steady daily increase in the open interest. Funding rates may get out of whack soon.

Curious Cryptos’ Commentary – Know Your Customer (KYC) and self-custodial wallets

KYC rules are a key plank in the financial system’s defence against money-laundering for drug dealers and the financing of terrorism, for both legacy finance and centralised crypto exchanges.

Regular readers already know that the EU Parliament in a deliberate act of self-harm has voted to put onerous requirements on centralised exchanges (CEX) with regards to transfers from and to self-custodial wallets such as Ledger Nano X.

That legislation is wending its way through the bureaucratic processes, and it is hoped that somewhere along the line the reality of losing crypto tax dollars because of excessive and intrusive regulation will make for a more pragmatic approach.

Indeed, on 21st June 2022 the CCC reported that the UK has made clear that such legislation will not apply to CEX operating under the UK’s jurisdiction:

“Instead of requiring the collection of beneficiary and originator information for all unhosted wallet transfers, crypto asset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance.”

This risk-assessment based approach to such issues is always and forever a better and more effective barrier to illicit transactions than any blanket rule could ever be.

…

Keen to damage their own crypto prospects, the Netherlands is driving forward with implementation of the rules proposed by the EU Parliament.

The authorities have decreed that the 1977 Sanctions Act – which I seriously doubt foresaw the existence of cryptos (*) – means that all CEX must have details of the owners of self-custodial wallets before allowing a transfer from the CEX to the wallet. These details include full name, residential address, and the purpose of the transfer.

Presumably this is just the first step.

After all, if the attitude of the authorities is that anyone using a self-custodial wallet is a drug dealer or a terrorist, it would be rash to assume that such people are likely to be entirely truthful when providing the required details.

If the administrative burden of verifying full names and residential addresses of self-custodial wallets (and I am not sure if it is even possible to do that) falls onto CEX, I suspect they will simply stop doing business in the Netherlands.

…

Which is potentially the objective of rapidly implementing these new rules from tomorrow.

Pieter Hasekamp, director of the Dutch Bureau for Economic Analysis under the Ministry of Economic Affairs and Climate Policy, published an essay entitled “The Netherlands must ban bitcoin.”

His demands are that mining, trading, and even holding BTC should be made illegal.

Good luck with that one.

As we have seen with countries such as Nigeria that temporarily “banned” BTC, such action merely leads to a price discrepancy within that country compared to outside of that country.

Prohibition has never worked in any sphere of human activity.

…

(*) Here is a link to the act if you want to try to spot the crypto references:

https://www.dnb.nl/voor-de-sector/open-boek-toezicht-wet-regelgeving/toezicht-wet-regelgeving/sanctiewet-1977-sw/