So, here's an update from the Netherlands on the (lack of) supervision by formal crypto supervisors DNB and AFM with repect to illegal operators in the Dutch market. It will be a bit long with referrals to Dutch items but I'll try to navigate you through Dutch and EU rules.
While non-EU operators of cryptoservices may make a business decision to wait for harmonised EU-license rules instead of registering on a state-by-state basis under the current AMLD5 legal regime, this could turn out to be a costly decision considering EU fair market rules.
In particular under Dutch rules, the consequence of not showing one's true colours -by not disclosing the lack of compliance with the EU and Dutch ruleset for cryptocompanies- will mean that quite realistically all illegally offered services to Dutch residents can be annulled.
However, both European and Dutch supervisory authorities lack the rigour and agressiveness of their US counterparts with respect to enforcing the crypto-registration rules to illegal (non-EU) operators. And most do overlook the important role of unfair market practices laws.
So if you bear with me, as this might become a big thread, I'll guide you through the jungle of relevant legislation. It's gonna be a long walk, but I have a nice classic tune for you lined up to accompany the read.
Our journey starts with a practical burning problem. Serious scams channeled by scammers via the systems and services of not adequately registered crypto-providers. These not only duck administrative law but generally civil law liability as well, using a mix of legal arguments.
This week I was invited to explain the relevant rules of the game on a consumer-tv-show here in the Netherlands. Here was a case of a man and his wife being cleverly played by scammers, leading to a loss of 600.000 euro with funds moved via @coinbase
Just by itself, this was a sickening scam but the victims had the guts to go public to explain their story to warn other people of these kinds of scams. And the guy in the story was the control-type. He had checked all relevant terms and conditions and such. But still scammed.
Now, this made me wonder. What do the terms and conditions of coinbase look like (you may want to read this mr @brian_armstrong). Because Coinbase has only last month received a registration in the Netherlands, while they should have one since end of 2020.
Ok, let's zoom in now. I see Coinbase Europe being registered at september 2022 for the exchange of virtual currency against fiat money (using the e-money entity) and Coinbase Custody for holding coins/virtual assets. But I don't find Coinbase Custody to be the contract entity.
So observation #1. Coinbase that has a registration in the Netherlands for storing virtual assets does not bind it's users to that legal entity, rendering their operation as a virtual asset storekeeper in the Netherlands still illegal as of today. coinbase.com/legal/user_agr…
Now let's check out the contract further, as this contract may actually demonstrate a lack of professional diligence by coinbase. This term is borrowed by the way from the EU Directive on unfair business-to-consumer commercial practices in the EU.
What strikes me is the lack of a date regarding the validity of the actual terms and conditions that are applied to EU residents in this contract. I can't see when this applies. Which is in contrast to normal practices applied by Paypal for example. Showing date of change.
Now let's take a closer look with respect to policy and terms update. These are quite interesting. Have a read here.
In essence Coinbase says: our contract terms may not be our true contract terms. Check out the truth yourself. Shifts liability fully in the process.
We see an anglo-saxon approach to contract law that doesn't work here in NL. Because if you won't committ to deliver services as promised on the website my immediate hunch is you're using a blacklisted condition. Little professional diligence here.
Now I'm digressing to this clause as I want to see what Coinbase explains on itself on its own website. Coinbase will say: check out the truth itself, but that argument doesn't hold under Dutch law. It should adequetely inform. And that is relevant.
Let's have a closer look.
As a way of ducking responsibility and shifting blame, Coinbase lays out a risk disclaimer to consumers. That deserves credit, so well done !
But then it says there is no Irish legislation on crypto services at present. Huh? Like no AMLD5 implementation?
So I checked, are the Irish being lazy? I thought I'd seen Gemini Partners being entered into the Irish AMLD5 register this summer. And I had another look. Yep, law in place since April 2021. And no registration for Coinbase Europe or Coinbase Ireland.
Fixed the Coinbase terms.
As the website of Coinbase clearly states. You have to do your own research on what is the truth and reality. Well, we've now seen the use of a blacklisted consumer term under Dutch law and outdated+insufficient information on applicable legal regime and legality of the offering.
The EU directive mentioned earlier defines misleading actions as not representing the nature of your offering properly. I think we can fairly state that Coinbase ticks a couple of boxes there. To be fair: almost all non-registered other crypto-players in EU tick those as well.
I can see you reading this thread think: that's a bit of nitpicking. Are you saying that most non-EU registered providers of crypto might be misleading consumers? Think DYOR.
What's the big deal?
Well, liability under contract law is the big deal here.
The above contract terms check is literally 15 minutes of time required. It's not rocket science. Any supervisor could do it but even better: each customer can do it. That's what my remarks were in the Dutch tv programma Radar. Recall the guy that lost 600.000 euro's worth?
He was the kind of guy that spells out terms and conditions and as you have seen, those terms and conditions were inaccurate, had no date on them, contained a black list clause and shifted all liability away. But if he had read truthfull terms (as fixed) he would have stopped.
To wrap up the part on professional diligence: in the terms and conditions of Coinbase, we may also look at how they construct the role of other entities. There is something as a Coinbase Group described. But the 2 Coinbase entities in Ireland have separate liability.
If I look at the contract structure I see an effort by Coinbase to try and create some corporate mist, using Coinbase Group with unknown entities. But hey, doesn't matter, as the contract is not a contract with the Coinbase Group.
Well, they are still with Coinbase Inc, Delaware. Which is not registered at DNB for provision of virtual asset custody services and thus technically still violating the Dutch laws.
Little professional diligence here.
Back to this weeks tv-programme on crypto-fraud. They asked me: should'nt the Dutch supervisors DNB and AFM be more prominent in ensuring compliance with Dutch law?
Well, perhaps, but you know what?
Administrative law may not only be relevant here. It's civil law and damages.
We have legal precedent here in the Netherlands where CFT-brokers from other countries (Cyprus etc) scammed people out of their money by applying unfair commercial practices. So the contract got annulled: all money back for consumer.
There will be grades of nuances and grey colours when looking at contract terms and the role of illegal crypto-operators in Europe, but for the case of Coinbase I think it is evident that there are multiple violations of the EU fair practice rules. While operating illegally.
Now, in Europe we have implemented fair practices in different ways. In the Netherlands we have as a sanction that contracts will be annulled. However in other EU member states there are administrative fines for providers, as a consequence of violating fair disclosure rules.
So let's have a look at the Netherlands. Binance got fined >3M for being illegal in the Netherlands. They still don't have a registration and I can't see how they will ever get it because our laws contain a reputation test for the Ultimate Beneficiary Owner (@cz_binance).
We could also look at another example: E-toro. This is a relevant precedence which showed an example of a company small enough to be stopped operating by the Dutch supervisor as they did not comply with all rules at the right moment in time (end of 2020).
Now, another specific element: as the Dutch AMLD5 law had a migration phase, there is legally no possibility for DNB to extend itself the period in which a registration should be gotten. So Coinbase, Binance, but also OK Coin were all illegal since end of 2020.
I could DDOS Twitter by listing all illegal operators in the Netherlands and Europe and their unfair practices since 2020 but I won't do it.
Let me just paraphrase.
'I have a truly marvelous demonstration of this proposition which this margin is too narrow to contain.'
So where does this get us? 1- All illegally operating crypto companies in EU are liable under civil law and vulnerable to paying fines/compensations for reason of not complying with the proper consumer disclosure rules in the EU
2- This needs adressing before MICAR enters here.
I respect that companies may want to make a business decision to willingly or unconsciously not comply with rules to consumer disclosure or company registration requirements.
They may only look at administrative law rules and the risk of being penalised by supervisors.
But if you choose to duck those rules you leave yourself open for civil damages that may be bigger than the administrative fines and that should also be part of your business decision.
So if you're sued by regulators or citizens, take responsibility and pay up.
We should respect that companies may make different choices with respect to their risk appetite for complying with local laws. But with each choice come consequences. Can't have your cake and eat it too.
So if you chose to gamble: you must be willing to pay the price or leave.
In this respect I look with interest at the public statements and actions demonstrated by Binance in the Netherlands and EU.
I see @cz_binance being aware that wrong ethical decisions come back to bite you.
PS 1. Thread was inspired by Freedom of Information request of 2000plus pages clearing up the rules as to when companies offer service in the Netherlands.
PS 2. The intention and act of servicing consumers in the Netherlands are well demonstrated of course, but just to clarify and be complete (and to save Coinbase money otherwise spend on lawyers disputing the local activity) here's the ticket.
PS 3. It does have the looks as if Binance is getting nearer to a registration every day as we see CZ cycling on a bakfiets and Binance now publishing this on Linkedin. Like: demo-ing that in Amsterdam, the Binance card is being used hits all buttons of illegal presence/focus.
PS 4. Card is available to everyone in EU since September 2020. This is a violation of Wwft precense and offering of services in the Netherlands. As the fine of 3M for Binance only pertains date until dec 2021, may we please see a next fine from december 2021 until today @DNB_NL
PS 5. Getting the tickets in order. Focus on the Netherlands and offering in the Netherlands.
Not stopped at all. Still ducking Dutch Wwft.
PS. 6. Binance is legally and technically, demonstrating its transgressions of the Dutch law (Wwft) on Linkedin while they could know it's an economic crime. So it's brave, audacious or has informal backing/condoning arrangements in NL already).
PS 7. Nope. Binance is not in our register. It's 100% illegal.
Ps 8. This is the relevant entry in our civil law code that says contract can undone if prior to contract unfair market practices were used/visible.
Paging all illegal crypto-companies in NL up their game in the Netherlands to an EU-compliant content of terms and conditions.
PS 9. Fair point.
Also: you are illegally operating in the Netherlands if you don't comply with Dutch law and don't stop/compensate the frauds that pass over your platform.
PS xx. Coinbase has updated its terms. Too bad they didn't follow my proposed wording and still the disclosure is marginally better than the previous one.
See old and new.
Ps 13. 1,5 years too late Coinbase has its registration in Ireland arranged.
PS 14. But their terms still suggest that there is no law for digital currencies in Ireland. Meaning these terms and conditions are really outdated, flawed and not up to standard.
PS 15. Kucoin being warned, still advertising in the Netherlands. Will be in for a nice fine, if Binance is the precedent. Let's estimate 3M.
PS 16. Gemini claiming to have en EA passport in Europe for crypto is only true for the payments part, but not for the crypto part. Why is that clarity missing?
This is misleading information, a break of Dutch law and contracts of Dutch customers with Gemini are thus void.
PS 17. Gemini offers contract terms for digital currency services in Dutch. While not having a registration as obliged under Dutch law.
PS 20. Coinbase New York, not doing enough in the area of compliance and such. Now settling for a 50M fine with a 50M investment in further compliance.
It confirms that if the outside structure and terms look weak, the inside most likely is as well.
@janheinstrop Christian Cordoba Lenis van Point Privacy Web krijgt hallucinante antwoorden van banken die opeens doen alsof transactiemonitoring nooit bestaan heeft, niet gecombineerd was. Terwijl hun eigen voorwaarden het tegendeel bewijzen.privacy-web.nl
Kent u die grap van dat Transactie Monitoring Nederland en hun beveiliging?
Waar inmiddels ruim 10 miljard transacties, inclusief die van particulieren opgeslagen zijn in een database. Héél goed beveiligd.
Waarvan @hrifeu aangeeft dat het zonder juridische grondslag is.
@HRiFEU Volgens mij hebben ze bij TMNL toch een beveiligingsprobleem.
Er lijkt een snuiter op hun subdomein namen te zitten.
Romanobet Website Agen Slot Gacor Rtp Romano Bet Akurat
Maar gaat u gerust slapen. Met de beveiliging zit het daar wel goed.
@HRiFEU Mooie site. Lijkt een Indonesische website/goksite te zijn. Heb maar niet doorgeklikt. Ik denk: DNS-truuk.
Maar het punt is even het volgende. Als TMNL een Indonesische goksite niet van haar site weet te houden, laat ze dan ook met de tengels van NL transactiedata afblijven.
There is much more to say. There is certain logic to the ruling. But technically the same reasoning on involvement and possible use of system without KYC applies to bitcoin and ethereum which have no built in compliance.
So bottom line: it's the bitcoin/ethereum e-gold case.
Meaning. It US DOJ has their eyes set on you, it's game over. And they were open and clear about it. So it's just the US execution of the gameplan for enforcement in cryptocurrency. Reaching over state borders.
Ok, pak je popcorn erbij. Dat wordt boeiend. Kosten toezicht crypto: geen 34.000 maar 150-250.000 per bedrijf. Transactie Monitoring Nederland: is het nou illegaal of niet?
Elke nieuwe leider heeft last van oude structuren. Vooral als ie de boel wil veranderen. Vorige keer dat we dat zagen in de bancaire sector was het .... Hamers... die omhoog geparachuteerd bij ING de hele organisatie agile ging maken.
Alles anders, stropdas af enzo.
Dat openbreken van structuren moet om de baas te kunnen zijn. Oude structuren en loyaliteiten moeten kapot. Dat is een classic in leidersland.
Je kunt het beestje allerlei namen geven. Denk aan culturele revolutie en dan krijg je het beeld wel helder.
Wat doe je als banken als je een handhavingsverzoek aan je broek hebt omdat je illegaal klanten data hebt zitten delen, al 3 jaar lang, in strijd met de anti-witwaswet?
Je kiest de publicitaire tegenaanval met alle middelen die er zijn. Zie bijgaand.
Er is natuurlijk niets tegen nadenken over het invullen van effectieve transactiemonitoring in Nederland, mits op legitieme basis. Die legitieme basis moet er echter wél zijn.
Vooruitlopen op regels past een organisatie dan niet.
In de update die @hrifeu aan de Tweede Kamer stuurde, deze week, is in de bijlage te lezen hoe Human Rights in Finance (EU) DNB nogmaals gemaand heeft om met spoed de overtreding van uitbestedingsverbod in de Wwft te beëindigen.