Hundreds of abuses around cryptocurrencies, no action is taken

Last year, Dutch financial authorities received hundreds of reports about potential cryptocurrency abuses. The action, however, was largely absent.

Shady investment funds, worthless cryptocurrencies, pumps and dumps: For unsuspecting consumers, there are dangers lurking in the world of cryptocurrencies. Citizens often report abuses to financial authorities, but they rarely act.

ANP / Hollandse Hoogte / De Vries MediaDe Vries Media

BNR asked the Dutch Authority for the Financial Markets (AFM) and De Nederlandsche Bank (DNB) how many reports they received about cryptocurrency-related abuses. The AFM received 303 notifications in 2021, almost twice as many as the previous year. The DNB speaks of ’10 to 12 emails and phone calls’ about cryptocurrencies per week, which equates to more than 500 per year. “These are generally questions,” says spokesman Bouke Bergsma. Despite repeated requests, the DNB cannot say how often abuses are reported.

DNB applied twice

However, this avalanche has produced little concrete action by regulators. According to them, this is the result of political choices. The AFM says that it has no mandate in the field of cryptocurrencies. The DNB says that its cryptocurrency enforcement is primarily focused on the registration obligation for cryptocurrency exchangers. ‘There is therefore no supervision in the Netherlands, not even from DNB, which provides for, for example, the protection of small investors,’ spokesman Bergsma said, ‘or any other form of market regulation.’

According to its own figures, the DNB took exactly two steps last year to enforce that rule. This included an official warning to Binance.

Crypto Sector Demands Tougher Action

‘He plays for the stage,’ says Simon Lelieveldt. The independent expert in the field of crypto regulations wonders why the DNB does not immediately impose fines on violators. “They are letting the market parties in the Netherlands suffocate by not enforcing.”

The lack of oversight by DNB hurts crypto businesses the most. ‘AFM is seen to be taking a broader and more proactive approach to its task, while DNB is doing less than the bare minimum,’ says Lelieveldt. Lelieveldt cites as an example the warning that the AFM issued to so-called ‘finfluencers’ in December. These could be breaking the law by promoting cryptocurrencies on social media. However, here too he remained with a caveat.

This lack of compliance makes consumers easy prey for rogue crypto traders. For example, BNR previously revealed that thousands of young people bought a token that was put on the market with the help of former Ajax manager Marc Overmars, among others. “Totally a non-product,” says Aaron Loupatty, creator of the Crypto Cowboys podcast. Loupatty identifies “a large gray area” in cryptocurrency regulations in which criminal law offers no protection. The cowboys do what they want in it.

‘Let criminals pay for supervision’

According to the DNB, the new European regulation (the Micar Directive) offers perspectives to extend the supervision, although the AFM considers it the appropriate part to address it. Meanwhile, crypto oversight remains ‘limited’ in the words of the DNB.

Crypto companies are required to pay DNB for this limited supervision: a total of about €2.7 million. Patrick van der Meide of United Bitcoin Companies Netherlands (VBNL) believes that the sector gets little value for this money. “You can see that there are still major players operating on the Dutch market without a license,” says Van der Meide.

Therefore, VBNL wants these criminals to pay for monitoring in the future. The DNB should collect fines with which the authority could finance the execution.

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