The Dutch central bank (DNB) has issued a warning on bitcoin aimed at banks and other financial institutions in the country.
Unlike most warnings issued by regulators and central banks across the globe, the Dutch warning does not address end-users of digital currency. Instead, the central bank clearly states that banks and payment institutions should be aware of integrity risks derived from processing transactions related to digital currencies.
Anonymity bad for business?
The warning (dated 5th June 2014) points out that digital currencies offer a high degree of anonymity so financial institutions should tread carefully, as digital currencies are classified as financial products “with a very high risk profile”.
The bank notes that digital currency transactions seem very transparent at first glance, due to the use of a public ledger. However, the bank warns:
The relatively high degree of anonymity carries implications for banks and payment institutions open to digital currencies. Because they are anonymous, there is no direct link between the parties trading digital currencies or making purchases in said currencies.
Involvement is risky
The central bank warns that the act of accepting business from a bitcoin operator could have an indirect effect on the reputation of a bank or payments service.
It expressed doubts over the ability of financial institutions to keep track of questionable transactions carried out using digital currencies before they process them, outlining the risk:
Still open to bitcoin
The bank also announced that it will determine whether banks and payment institutions involved in the digital currency space can assess these risks.
There is no specific date for the control measures, but the bank says it will begin rolling them out this year in an effort to improve customer experience and monitor “new and innovative” companies.
For the time being, Holland is one of the more liberal countries in Europe when it comes to bitcoin. It has attracted a number of bitcoin startups and some established companies are getting involved, including local payments processors.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.