In a significant regulatory action, the De Nederlandsche Bank (DNB), the central bank of the Netherlands, has imposed a hefty fine of €2.85 million on Foris DAX MT Limited, better known by its trade name Crypto.com. The fine, announced on March 13, 2023, but imposed back in October 2022, comes as a result of the cryptocurrency exchange operating in the Netherlands without the necessary registration from May 21, 2020, to at least November 8, 2022. This period marks a significant oversight in compliance with the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft), highlighting the challenges and responsibilities facing crypto service providers in adhering to regulatory standards.
Registration and Compliance: A Must for Crypto Services
The DNB's stringent action underscores the importance of registration for companies offering crypto services within the Netherlands. The registration requirement, introduced on May 21, 2020, aims to mitigate the risks of money laundering and terrorist financing associated with the anonymity of crypto transactions. By registering, companies commit to reporting unusual transactions to the Financial Intelligence Unit-Netherlands, a critical step in combating illicit financial flows.
Crypto.com's failure to register not only contravened the Wwft's objectives but also potentially allowed numerous unusual transactions to escape the scrutiny of investigative authorities. This lapse in compliance has been deemed "very severe" by the DNB, given the prolonged period of non-compliance and the significant number of Dutch customers relying on Crypto.com's services.
The Fine
The fine of €2.85 million, while within the category 3 fine range of €0 to €4 million, was determined based on the DNB's General fine calculation policy. The base amount of €2 million was increased due to the severity of the violation and the degree of culpability. Factors contributing to the increased fine include:
- Crypto.com's significant customer base is in the Netherlands.
- The competitive advantage gained by avoiding supervisory fees and compliance costs.
- The prolonged period of non-compliance spanning over two years.
This action by the DNB sends a clear message to the crypto industry about the importance of regulatory compliance and the potential financial repercussions of non-compliance.
Broader Implications for the Crypto Industry
The fine imposed on Crypto.com is part of a broader regulatory trend in the Netherlands and beyond, with the DNB previously issuing fines to other major crypto exchanges like Coinbase and Binance for similar violations. These actions highlight the increasing scrutiny of crypto service providers by regulatory bodies and the need for these companies to prioritize compliance to operate successfully in regulated markets.
Crypto.com's response to this situation, including any steps taken to address the regulatory concerns and prevent future violations, will be closely watched by the industry and regulatory authorities alike. The company has since registered with the DNB, indicating a move towards compliance and a recognition of the importance of adhering to regulatory standards.
Conclusion
The €2.85 million fine against Crypto.com by the Dutch Central Bank serves as a stark reminder of the regulatory obligations facing crypto service providers. As the industry continues to evolve, the importance of compliance with anti-money laundering and anti-terrorist financing regulations cannot be overstated. For companies operating in the crypto space, this incident underscores the need for vigilance, transparency, and a proactive approach to regulatory compliance to ensure sustainable operations and the trust of customers and authorities alike.
