Cryptocurrency Regulation in the Netherlands Prior to 2024

As of the years leading up to 2024, the regulatory landscape for cryptocurrencies in the Netherlands was characterized by a cautious yet progressive approach. The Dutch government and financial authorities sought to balance the risks and potentials of cryptocurrencies, highlighting the need for an international regulatory framework due to the transnational nature of these digital assets.

Early Concerns and the Call for International Regulation

The Dutch Minister of Finance, in 2018, communicated to the House of Representatives the inadequacy of the existing supervisory and regulatory framework for cryptocurrencies. Emphasizing the need for a European or international approach, the Netherlands aimed to pioneer cryptocurrency laws in the EU to curb improper use, given the popularity of cryptocurrencies among criminals and terrorists. This sentiment was reiterated in 2020, with a focus on reducing risks related to money laundering, terrorism financing, consumer protection, market integrity, and capital requirements​

​Contrasting Views on Regulation

The Netherlands Bureau for Economic Policy Analysis (CPB), the government’s main economic advisor, suggested a total ban on cryptocurrencies, fearing an inevitable crash and the legitimization of cryptocurrencies as financial products. Contrarily, the Dutch Minister of Finance in June 2021 argued that regulation and supervision would be more effective than an outright ban​

​Role of the Dutch Central Bank (DNB)

The DNB has been vocal about the risks of cryptocurrencies, focusing its regulation solely on anti-money laundering and countering the financing of terrorism (AML/CFT). The DNB does not recognize cryptocurrencies as legal tender due to their high volatility and susceptibility to criminal misuse. A report by DNB in November 2022 underlined the unsuitability of uncovered cryptocurrencies as reliable mediums of exchange, stores of value, or units of account, attributing this to their volatile nature and lack of underlying assets​

​Legal Framework and Cryptocurrency Classification

The Financial Supervision Act (FSA), Dutch AML Act, and Prospectus Regulation formed the core regulatory framework for cryptocurrencies. The FSA did not specifically define cryptocurrencies, categorizing them based on their characteristics as either financial instruments, rights in alternative investment funds, or investment objects. It is worth noting that cryptocurrencies did not qualify as money under the FSA, as they are not issued by a central body and lack the characteristics of electronic money​

​Towards International Regulation: MiCAR Proposal

Both the Dutch Authority for the Financial Markets (AFM) and DNB advocated for the regulation of cryptocurrency trade at the international level. The European Commission’s MiCAR proposal, reached in June 2022, aimed to protect customers against risks associated with crypto-assets. Applicable to crypto-assets and services not covered by other European regulations, MiCAR was a significant step towards comprehensive regulation of the crypto market in the EU​

​

In conclusion, the Netherlands’ approach to cryptocurrency regulation prior to 2024 demonstrated a cautious yet forward-looking stance, recognizing both the risks and potential of digital currencies. The focus was on aligning with broader European initiatives, particularly the MiCAR proposal, to ensure effective and comprehensive regulation of the rapidly evolving cryptocurrency sector.