Dutch regulator consults on its controversial wallet verification

What is this about?

On 19 November 2021, the Dutch regulator (DNB) launched a consultation on a Q&A regarding the application of its heavily criticised wallet verification requirement. The consultation period ends on 17 December 2021.

Which parties should care?

Firms that are in scope of the registration regime for crypto service providers under the Dutch Anti-Money Laundering Act. For example, due to providing custodian wallet services or exchange services between virtual currencies and fiat currencies in the Netherlands. This includes European firms providing such crypto services in the Netherlands on a pure cross-border basis.

What should they know?

Following the ruling of the preliminary relief judge of the Rotterdam court on 7 April 2021 (see our note), DNB decided on a Dutch bitcoin exchange's (Bitonic) objections to the wallet verification requirement. As a result, DNB changed its approach and now allows for risk-based compliance with the wallet verification requirement (see our note).

Following these developments, on 19 November 2021 DNB launched its consultation on a Q&A regarding this requirement, which among others addresses:

• which persons fall in scope of the term 'relationship';

• risk-based compliance with the wallet verification requirement and the relevant elements of the risk analysis;

• good practices to manage the risk of violating sanctions legislation; and

• good practices to establish whether the counterparty specified by the client is in fact the recipient or the sender.

When does this become relevant?

This matter is relevant for crypto service providers that intend to apply for a registration, are in the process of applying for the registration or have already been registered.

The consultation on the Q&A regarding 'Sanctions screening for inbound and outbound crypto transactions' is available here.