Bitcoin may have suffered a regulatory setback yesterday when the Dutch Central Bank warned Dutch banks about the possible risks of engaging with Bitcoin-related businesses.
Bitcoin has grained significant popularity in the Netherlands compared to many other countries. This Reddit post from last December illustrates the ease of using Bitcoin at online retailers in the country, and at some brick-and-mortar ones as well. The Netherlands also has one of the highest Google search volumes of the the term “Bitcoin” of any country in the world.
But the Dutch Central Bank said in its statement that banks should be hesitant about doing business with Bitcoin-related businesses because of its anonymity, which could be used to skirt anti-money laundering laws. That makes virtual currencies like Bitcoin “an attratcive target for criminal activities,” the central bank said in its statement.
[For More on Bitcoin, Check Out: Why Bitcoin Won’t Die]
The Dutch Central Bank also expressed concerns over liability and the volatility of Bitcoin’s exchange rate. It also said that it will examine whether banks and payments providers in the country are involved in Bitcoin activities and whether they have controls in place to deal with the risks it cited. The U.K. government has also intends to investigate the application of anti-money laundering laws to virtual currencies.
Some countries, like China, have already banned Bitcoin. In the U.S., the Federal Reserve has yet to make any rules regarding Bitcoin, although FINCEN has ruled that individuals mining Bitcoins for personal use, and companies trading in Bitcoins as an investment are not subject to the Bank Secrecy Act and its money-laundering rules. If the Netherlands --a country where Bitcoin has already gained some measure of public acceptance -- were to seriously restrict the use of Bitcoin, it could impact how other countries in the EU approach regulation of virtual currencies. And, with China already out of the Bitcoin game, that in turn could harm the viability of Bitcoin as an international payments mechanism.
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio