To comply with Dutch regulations, Netherlands-based Bitstamp users can no longer make withdrawals without first providing photographic proof they own the recipient wallet.
Digital asset exchange Bitstamp has reportedly banned Netherlands-based users from withdrawing crypto to external wallets without first verifying they own the receiving address.
According to a letter authored by Bitstamp that was shared on Twitter by user “Bitcoin Marcus,” Bitstamp’s users in Holland must now submit third-party addresses alongside photographic evidence they own the wallet for whitelisting before withdrawals will be processed.
“Whitelisting is a security feature which was already available at Bitstamp, but now it has become obligatory for all customers affected by the new regulation in the Netherlands,” the letter stated.
Yes, this is real. People in the Netherlands now have to KYC their withdraw addresses. pic.twitter.com/S2H5Gszh9X
— Bitcoin Marcus ☣️⚡️ (@plan_marcus) January 17, 2021
Bitstamp’s new withdrawal rules are in response to anti-money laundering regulations that were drafted by Dutch regulators in November 2019 and passed into law 12 months later.
These rules stipulate that “crypto service providers must check whether their clients and any ultimate beneficiary owners are on a Dutch or European sanctions list” before providing services, and monitor all “incoming and outgoing payment transfers.”
In November, Netherlands-based Bitcoin exchange Bitconic informed its users they needed to comply with the new verification measures for withdrawals. At the time, the exchange called the enforcement of the central bank’s policy “a nuisance.”
Bitstamp users went further in their criticism of the regulations, with Twitter user “xcsler” mocking the exchange’s efforts to comply with Dutch law:
“Clearly, the next step will be to make people responsible for all subsequent transactions from that whitelisted address.”
In November, quantitative analyst PlanB likened the Dutch regulations to policies recently recommended by U.S. Treasury Secretary, Steve Mnuchin. Coinbase CEO Brian Armstrong made waves online at the time, expressing major concerns over Mnuchin’s proposed regulation on self-hosted crypto wallets.
The Netherlands implemented these laws 2 weeks ago. You now have to screenshot your wallet when withdrawing bitcoin from Dutch exchanges, easy but annoying. Make sure you vote people in power that protect property rights and bitcoin, and remove people who don’t protect freedom. https://t.co/BCcogxS8IE
— PlanB (@100trillionUSD) November 26, 2020
It is not yet clear how incoming U.S. President Joe Biden’s administration will handle KYC/AML enforcement in the crypto space. Lawyer Jake Chervinsky has argued that Mnuchin’s policy has “exactly zero chance” of becoming an enforceable law under Biden’s pick for Treasury Secretary, Janet Yellen.
Cointelegraph reached out to Bitstamp for comment, but did not receive a reply at the time of publication.
“My conviction is that address verification is unlikely to be very productive in fighting financial crime.”
The post A Commentary On FinCEN’s Proposed KYC Requirements appeared first on Bitcoin Magazine.
The U.S. Treasury bureau proposed a rule that would require cryptocurrency exchanges to submit reports on withdrawals to “unhosted wallets.”
The post FinCEN Proposes KYC For Withdrawing Cryptocurrency To Private Wallets appeared first on Bitcoin Magazine.
Determining the future of who can and cannot custody crypto and how much you need to know about them remains a central topic of discussion.
Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Last week’s Law Decoded sounded the alarm on threats to self-custodial wallets in the U.S. in particular. While such concerns have continued to take shape, nothing concrete has emerged from the U.S. Treasury, which was at the heart of last week’s conversation.
Though I don’t like to recycle themes, it seems a reasonable time to ask the question: What is a crypto wallet as far as a regulator is concerned?
While many people access their crypto through custodial solutions in which your “crypto” is yours on someone else’s ledger rather than on the underlying blockchain, real wallets are just means of managing private and public keys. They are analogous to bank accounts in that they let you transfer value in the form of Bitcoin or whatever else, which is where many regulators see their right to step in.
Bank accounts in most major economies require a fair amount of personal information as a means of preventing money laundering, but they are still involved in facilitating plenty of illicit activity. Exemptions for corporate entities, for example, have created notoriously difficult webs to untangle in investigations. And while regulators may be willing to look at crypto wallets as bank accounts to get more authority to reign them in, it’s disingenuous to say that bank accounts are the only analogy available. You can buy a real wallet and fill it with cash without ever having to pass a KYC check.
The regulatory counterargument is, of course, that it takes much more time to bring a real wallet full of cash to, say, a sanctioned person in Iran than to send the equivalent value to that person’s Bitcoin wallet. But, nobody at this point is really finding that Bitcoin, in its current state, is more likely to be caught up in illegal activity than cash or even bank accounts. So from a regulatory perspective, it seems odd to prioritize a hypothetical problem over existing problems of equal or greater scale.
Liberté, égalité, mais pas anonymité
France is looking askance at anonymous crypto accounts, per a recent order from several French ministries.
The order primarily reinforces that existing financial controls — especially those requiring accounts and assets to be traceable to beneficial owners — also apply to crypto. Effectively, this would mean that crypto addresses need to be traceable to specific customers. The order refers to this as a way of integrating crypto further into the regular financial system.
The most notable signatory to the order was Minister of Finance Bruno Le Maire. At the heart of the order are the usual suspects: Fear of money laundering and terrorism financing. Le Maire in particular has been critical of crypto as a means to unseat national monetary sovereignty.
However, the extent of this order’s application seems limited. It refers extensively to the Financial Action Task Force’s guidance, which concentrates on exchanges rather than independent wallets. Though the order specifies that crypto-to-crypto exchanges are within its purview, it’s also notoriously difficult for governments to be sure that such transactions are happening within their jurisdictions, which is a big part of why authorities tend to focus on crypto-to-fiat gateways. Nonetheless, such an order adds legal force to enforcers in one of the biggest economies in Europe and their ability to attack anonymous exchanges of crypto.
Congressional Blockchain Caucus beefs with regulators over crypto
The two letters included overlapping members as signatories, especially those from the Blockchain Caucus. They also shared concerns with anticipated rulemaking, though the legislators were asking the Treasury to pump the brakes and the SEC to hit the gas.
The letter to the Treasury focused on a rumored ban on self-custody i.e. wallets that are not in the hands of exchanges or other financial institutions that can report on the details of the wallet owners. In other words, an attack on peer-to-peer, which seems impractical but also would undermine one of the foundational pillars of crypto.
The letter to the SEC was a request for clarity on who can custody security tokens — a major hold-up for potential broker-dealers trying to register with self-regulatory group, FINRA. Currently, there is a backlog of applications in limbo, seeing neither acceptance or rejection. Without clear guidance, nobody knows how to proceed.
Privacy wallets have skyrocketed in popularity this year
As self-custodial wallets fall under threat, wallets that specifically enhance privacy are gaining popularity among allegedly illicit actors.
Per analytics firm Elliptic, the overall proportion of Bitcoin transactions that involve illicit usage has dropped significantly over the past several years as mainstream investment has picked up.
While mixers seem to have gained some traction with criminal activity this year, privacy wallets — especially Wasabi — seem to have come out on top. The firm noted that illicit crypto made its first stop in such wallets in 13% of cases, compared to just 3% the year before. The firm further confirmed that they still generally can’t trace Bitcoin upon its departure from such wallets, which would seem to mean that the technology is working.
AEI’s Jim Harper interrogates the logic of holding crypto programmers responsible in the same way as fiduciaries.
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Jason Razovsky of R3’s legal team advises other counsel on legal concerns of proprietary blockchain software.