Regulation
Cryptocurrency Regulations in the Netherlands 2024
The Netherlands is considered a European financial center. It is one of the few countries that has a clear position on cryptocurrencies. The Dutch Central Bank defines cryptocurrencies as digital representatives of value not issued by a central bank or public authority. According to the bank’s current policy on cryptocurrencies, these digital assets are not legally recognized as money, but are accepted by individuals and companies for exchange, storage, and e-commerce.
Here we explore the regulatory framework for cryptocurrencies in the Netherlands. This exploration is crucial, as it can reveal the direction in which this advanced economy is currently heading.
1. Cryptocurrency regulation in the Netherlands: general overview
There are no serious restrictions on cryptocurrency transactions in the Netherlands. This policy makes the country an attractive destination for virtual asset service providers (VASPs). This does not mean that the cryptocurrency sector is a gray area. In 2020, the country ratified the Dutch Implementation Act, which aligns with the European Union’s Fifth Anti-Money Laundering Directive (AMLD5).
According to the developments, cryptocurrency exchanges and digital wallet providers are supposed to register with the Dutch Central Bank (DNB). Once registered, the companies are placed under the supervision of the DNB. The authority ensures that registered companies comply with the Anti-Money Laundering and Combating the Financing of Terrorism Act (Wwft). Monitoring unusual transactions and conducting background checks on customers are the main strategies used by the authority to ensure compliance of the companies registered under its supervision.
2. Cryptocurrency regulation in the Netherlands: what’s new
January 22, 2024: The Ministry of Finance is opening consultations on the regulation of crypto-asset markets and on the regulation of information on crypto-asset transfers and money transfers.
January 30, 2024: Cryptocurrency Exchange bitpanda
bitpanda support@bitpanda.com Centralized Exchange
announces it will “exclude” Dutch residents due to regulatory compliance concerns.
February 8, 2024: kraken
kraken support@kraken.com Centralized Exchange
obtains registration as a virtual asset service provider with the DNB.
February 16, 2024: bybit
bybit Centralized ExchangeCryptocurrency Trading and Information
announces its intention to open an office in Amsterdam through a strategic partnership with SATOS, a licensed VASP recognized by the DNB.
March 13, 2024: DNB fines Crypto.com €2.85 million for operating without registration from May 2020 to November 2022.
March 28, 2024: Bybit launches its digital asset platform, Bybit.nl, in the Netherlands. The platform offers regulated cryptocurrency exchanges and educational resources.
June 3, 2024: Okex
Okex Centralized Exchange
launches its crypto exchange and Web 3 wallet in the Netherlands. It integrates the local payment system iDeal.
3. Status of cryptocurrency regulation in the main business areas in the Netherlands
In the Netherlands, the regulation of the main cryptocurrency-related activities (exchanging, custody, borrowing and staking) is partly governed by specific laws and guidelines.
Jail: Custody wallet providers must register with the Dutch Central Bank if they offer their services in or from the Netherlands.
Exchange: Cryptocurrency exchanges must also register with the DNB, as per the 2020 development. Notably, exchanges facilitating only crypto-to-crypto trades are not required to be registered.
Borrowings and staking: Both activities are still partly grey areas, as they are not regulated. Borrowings may be subject to consumer credit regulation, and returns may be subject to collective investment scheme regulation. But no official announcements on these issues have yet been made by the relevant Dutch authorities, such as the AFM and the DNB.
4. Explanation of the tax framework for cryptocurrencies in the Netherlands
In the Netherlands, cryptocurrencies are taxed as assets. The country’s tax system underwent a significant change in 2022. Under the new tax system, a presumed return is applied to assets, assuming a fixed return regardless of actual income. This approach is different from countries that tax cryptocurrencies as property, where gains or losses are only realized upon transactions.
Every January 1st, the taxable base of a person’s assets is reset and the wealth tax is calculated on the basis of the presumed return on assets from the previous year.
In the meantime, cryptography professionals are taxed differently. Their earnings are considered regular income and are taxed at income tax rates, which are 36.93% up to 73,031 euros and 49.50% above that amount.
For companiesAll income related to cryptocurrencies is included in the calculation of taxable profit. The corporate tax rate in 2023 starts at 19% for the first €200,000 of profit, increasing to 25.8% for amounts above this mark.
5. Cryptocurrency Mining in the Netherlands: What You Need to Know
Cryptocurrency mining is not illegal in the Netherlands. The country has a very strong cryptocurrency mining community. It also has a very advanced cryptocurrency mining infrastructure. The tax rules for cryptocurrency mining in the country depend on whether the cryptocurrency mining activity is carried out commercially or not.
A person’s taxable income in the Netherlands is generally classified into three categories:
- Box 1: Income from work and home ownership
- Box 2: Substantial interest income
- Box 3: Income from savings and investments
If cryptocurrency mining is part of a business activity, the income is taxed under box 1. If mining is not considered a business activity, the income is treated under box 3, as it is considered an asset.
6. Timeline of the evolution of cryptocurrency regulation in the Netherlands
Here is a timeline of the evolution of cryptocurrency regulation in the Netherlands:
2018: The DNB claims that cryptocurrencies do not fulfill the role of money and have no impact on monetary policy. In the same year, the Dutch Minister of Finance took a position in parliament in favor of the concept of regulating cryptocurrencies, rather than banning them.
2020: The country is amending its Prevention of Money Laundering and Terrorism Financing Act (Wwft) to align it with the 5th European Anti-Money Laundering and Countering the Financing of Terrorism Directive (AMLD5).
2023: The International Organization of Securities Commissions (IOSCO) opens a consultation on proposed recommendations for the regulation of crypto-assets. In the same year, the DBA published the sector framework on crypto-asset service providers (CASPs).
2024: The Ministry of Finance opens consultations on the regulation of crypto-asset markets (MiCAR) and on the regulation of information on crypto-asset transfers and money transfers.
Endnote
According to the DNB, the future of cryptocurrencies is uncertain. But it believes that cryptocurrencies are here to stay. The Netherlands certainly recognizes that as the cryptocurrency market evolves, its regulatory framework must also adapt. According to reports, the country is considering introducing new legislation to regulate the cryptocurrency sector.
Consumer protection and stability are the two main areas that the country’s future regulation will focus on. We can see that the regulatory environment for cryptocurrencies in the Netherlands is improving and is expected to improve in the coming years, thanks to the welcoming attitude of its government authority and the growing enthusiasm of its crypto community.
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