With money laundering scandals hitting many of the European Union’s biggest banks, concerns have been growing that cryptocurrency is becoming a popular choice for criminals wanting to hide cash.
Trying to corral this under-regulated area, the Dutch Central Bank will start requiring that cryptocurrency business get a license in order to operate. De Telegraaf reports that the move has been prompted by fears the dirty money could be used to finance terrorism.
Crypto companies that qualify for approval have the responsibility of reporting “unusual transactions” and ensuring they know their clients by adhering to Know Your Customer (KYC) checks. Similar regulations have been enforced in the United States for several years, with several large cryptocurrency exchanges based in Europe adhering to similar rules on a voluntary basis.
Bank officials said they made the move because the crypto market is highly decentralized. Their concern is that cryptocurrency transactions could become a potential alternative for those wanting to move dirty money as the EU introduces tighter banking regulations.
There is no consensus about whether cryptocurrency transactions are a major vector for illicit financial movements. A Wall Street Journal investigation from September 2018 estimated that more than $88 million had been laundered since 2016, with transactions occurring at more than 46 cryptocurrency exchanges spread across the globe.
One of the exchanges cited in the Journal’s reporting was ShapeShift, which was said to have processed over $9 million in illegal transactions in the last two years. The Swiss incorporated altcoin exchange has since tightened its vetting of customers, who are no longer allowed to trade anonymously and now have to complete a mandatory KYC requirement.
In April last year, Quebec’s government published a report that concluded bitcoin was not the “go-to vehicle” when it comes to money laundering or other criminal activities, with the amounts far below those emerging from major banking scandals, like $230 billion associated with Danske Bank.