Last Wednesday, the 24th of January, the Committee of Finance organized a roundtable to discuss the current and future role of cryptocurrencies and ICOs in the Netherlands. The roundtable was held in the Groen van Prinstererzaal, with attendees representing different stakeholders, ranging from cryptocurrency and blockchain experts to financial authoritative instances. The roundtable was divided into three 45-minute rounds. During their respective rounds, the company and institutional representatives introduced their position papers regarding the topic, after which the committee members asked questions and received answers from the representatives.
Round 1: Dutch Association of Bitcoin-companies (VBNL) – Bitonic, Follow Coin – the Dutch Investors’ Assocation (VEB)
Mieke de Haas for VBNL – Opportunities require a collaborative effort
Mieke de Haas, co-founder of the bitcoin account provider Bitmymoney and board member of VBNL kicked off the roundtable, stating VBNL’s vision. The position paper lists a number of benefits related to cryptocurrencies, such as the continuous processing of transactions, the fact that cryptocurrencies (in most cases) are not subject to unilateral manipulation and the opportunities created by smart-contracts. Additionally, cryptocurrencies have the potential to offer digital payment methods to 2 billion people globally that have been excluded from banking services.
She continues to make the point that CEOs and offices related to cryptocurrencies counteract the main benefit of the digital currencies, which is the lack of a central regulatory body. Regarding the heavily-discussed topic of crypto-related risks and illegal activities, she states that bitcoin companies operate as gatekeepers to make sure the consumers are up date concerning the nature of their investments and monitor suspicious investor behaviour simultaneously.
Concludingly, Mieke remarks that in order to positively stimulate the development of cryptocurrencies, regulation originating from cooperation between all stakeholders will be much more beneficial than governmental regulation.
Jouke Hofman for Bitonic – Bitcoin, blockchains and their application
As Bitonic is a bitcoin broker which offers a bitcoin exchange platform, Jouke is a proponent of the opportunities offered by bitcoin and its underlying technology.
Jouke emphasizes the division of cryptocurrency and ICO debate into three main topics. These topics are the bitcoin world, other blockchains (such as Ethereum) and finally commercial applications of blockchains (i.e. distributed ledgers).
Answering questions from the committee, Jouke explains that bitcoin and blockchain are still in the early stages of their development and application potential. Currently, he adds, cryptocurrencies are viewed as investment products, whereas it is probable that they will be used as payment methods in the future. Regarding fraud and illegal activities, Bitonic as well as other bitcoin companies, monitor and verify transactions to prevent these impure activities as much as possible.
Thomas van der Bijl for Follow Coin – The Netherlands as cryptocurrency and ICO pioneer
The CEO of Follow Coin came to the roundtable to reshape the current, predominantly negative image held by cryptocurrencies. Follow Coin enables consumers to track investments made by experienced influencers and copy their investments.
Thomas believes that great potential is held by cryptocurrencies and its underlying technology, yet realizes that its development remains in its early stages. Thus, he sees a lot of opportunity for the Netherlands and envisions a role for the country as a pioneer in the domain by creating stimulating policies and regulations regarding cryptocurrencies and ICOs.
Similar to the preceding speakers, Thomas believes that creating regulatory systems should be a collaborative effort, in which cryptocurrency-related companies are involved as well. Investor information will be tracked when they use cryptocurrencies as payment methods. This is when the storing of cryptocurrencies becomes relevant, i.e. for tax related purposes.
Niels Lemmers for VEB – Warning signs
The Dutch Investors’ Association wishes to raise attention to five points in the digital currency world. First of all, cryptocurrency trading should be subject to regulation due to the related risks. Secondly, the VEB envisions a role for the European Central Bank to regulate payments and currency conversions with cryptocurrencies. Third, they regard cryptocurrency trading as pure speculation due to the absence of underlying assets. Next, the VEB emphasizes that blockchain is an important financial innovation and should not be confused with the cryptocurrency hype. Therefore, further developments of blockchain-applications should not be dampened by the cryptocurrency trading hype. Lastly, the VEB warns of companies that suddenly adopt blockchain or cryptocurrency in their company descriptions, names or projects only to lure investors and boost stock prices.
Round 2: ING Economisch Bureau – DutchChain – Follow the Money
Teunis Brosens for ING – Don’t overestimate the current benefits of cryptocurrencies
Teunis questions the centrality of cryptocurrency payments. Miners validate transactions and, to enhance their chances of processing a transaction, large pools of miners exist. As the three largest mining-pools are responsible for over 50% of the mining-power, he undermines the centrality of cryptocurrencies. Also, everybody can contribute to the code behind the technology, yet only 10 programmers are responsible for over 75% of the code adjustments. From the other side, Teunis praises the development speed of the technology and admits that ICOs can be a useful method of financing. He proposes a proactive approach towards cryptocurrencies and blockchain for the financial sector, yet warns of a too rosy perspective on the benefits of cryptocurrencies.
Rutger van Zuidam for DutchChain – A proactive, critical and entrepreneurial approach
In collaboration with Sweetbridge, DutchChain created a position paper outlining guidelines for a safe environment for responsible ICOs. To enable responsible ICOs, a clear understanding of and compliance with regulations by the market is necessary. This way, the Netherlands can attract foreign companies to do fully legal and correct ICOs. Additionally, Rutger emphasizes the importance of the government’s role in stimulating entrepreneurship.
DutchChain advocates a shift in attitude, where opinions and scepticism derived should not be derived from ignorance. Instead, focus should be targeted at the development of the future and at problems that require solving.
With cryptocurrencies, most problems related to the current financial infrastructure can be solved. The whole topic of cryptocurrencies and ICOs should be looked at with a proactive, critical and entrepreneurial approach, that initially requires a clear vision. Although it may be impossible to create a perfect system, he feels that a drastically better alternative than the one we have now is feasible.
Thomas Bollen for Follow the Money – More trustworthy, safe and efficient payments
In the position paper, Thomas advocates the further development of cryptocurrencies and its underlying technology. Our current offering of digital payment methods enable us to mainly use scriptural money for payments. This makes consumers dependent on banks for payments (not the case when using physical money). This is where the invention of bitcoin comes in to play, as the technology offers new ways of digital payments, removing the bank-dependency. The innovative technology offers new opportunities for open source networks, adding transparency and accessibility, and removing censorship. Thus, digital payments become more trustworthy, safe and efficient.
Similar to the other roundtable participants, Thomas realizes the early development stages the technology resides in. Therefore, he states it is important to experiment with cryptocurrencies, in the private domain as well as in the public domain. The government must assume a role in which it proactively stimulates monetary innovation, remaining aware of the related risks, yet giving enough room to experimentation.
Dutch citizens have the right to be able to pay and save money with risk-free central bank-money: a digital monetary object. The role of physical money, as well as that of the banks will shift. This transition will require guidance in order to secure financial stability.
Round 3: The Dutch Central Bank (DNB) – the Dutch Authority for the Financial Markets (AFM) – the Netherlands Authority for Consumers and Markets (ACM) – Financial Intelligence Unit (FIU)
Petra Hielkema for DNB – Risks of not having a supervisory and guarantee system
Since cryptocurrencies aren’t yet widely used or accepted as payment methods, they currently don’t require specific policies by the DNB. Cryptocurrencies interests the DNB from the role as protector of the financial stability, efficiency and robustness of payment transaction as well as from the role as supervisor of the financial solidarity and integrity of financial companies.
The current, speculative nature of cryptocurrencies accompanied with increasing investor interest is a point of concern for the DNB. Therefore, the DNB warns of the risks related to bitcoin and other digital coins due to the lack of a supervisory and guarantee system. However, the DNB also appreciates the potential of blockchain, which is why the central bank researches and experiments with the technology. Additionally, they are engaging in talks with new and existing parties regarding potential applications, thereby contributing to innovation .
Lars van de Ven for AFM – Speculation, illegal and criminal activities
According to the AFM, cryptocurrencies don’t only impact financial domains due to their speculative nature. Illegal activities and criminality related to cryptocurrency transactions such as tax evasion, deception and scams also impact society.
ICOs should technically be subject to the AFM’s supervision. However, most ICOs are structured in such a way that they fall outside of the ambit of financial supervision. Thus, there are no financial laws and regulations to offer protection. Also, as ICOs aren’t confined to national borders, laws and regulations should be enforced on international and European level.
Evert Jan Hummelen for ACM – Consumer protection is necessary
The proposition paper outlines the supervisory matters and authorizations assigned to the ACM with respect to consumer protection of cryptocurrencies and ICOs. The paper leads to the conclusion that the ACM can only partially tackle the problems caused by cryptocurrencies and ICOs.
Because cryptocurrencies have a lot of resemblance with existing financial products, consumers might view them as identical products. The ACM can only operate outside of the authority given to the AFM. Most likely, the ACM can only offer consumer protection regarding transactions where companies are involved.
As the current supervisory framework doesn’t completely cover the phenomena of cryptocurrencies and ICOs, addressing related problems can be cumbersome. Therefore, the ACM would like to contribute to finding an answer to the question of which supervisory authority should be given responsibility for consumer protection as a result from cryptocurrencies and ICOs.
Willem Veldhuyzen for FIU – Fragmentation and internationalisation of payment transactions
In the past year, the FIU witnessed an increase of suspicious transactions related to cryptocurrencies. Most complaints filed were related to money laundering, whereas a number of complaints had to do with terrorism financing and other forms of criminal activity.
Platforms facilitating the exchange of virtual currencies and wallet providers are subject to the EU anti-money laundering directive, making those parties responsible for the reporting of suspicious transactions. The FIU sees fragmentation and internationalisation of payment transactions. Accompanying this development is the increasing use of technology, such as analytical software and algorithms to detect money laundering activities.
By Michael Brooijmans, Research Analyst at Holland FinTech