Crypto and the Dutch Banking Association - icoinic
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Andy Wong - Fundamental Analyst - Icoinic B.V.
Andy Wong
Author
Analist

The sentiment of the current financial overlords is that crypto is starting to get too big to ignore. We’ve seen multiple regulatory institutions easing up on regulations and starting to approve products and funds for the cryptocurrency markets.

Grayscale was approved by the FINRA to publicly quote its Grayscale Digital Large Cap fund (GDLCF) on over-the-counter (OTC) markets. The same institution also approved tZERO as a broker-dealer subsidiary. Another firm, Seedinvest a Circle-backed startup, also received FINRA approval for its Alternative Trading System, which will make it possible to offer ICO tokens to be sold as securities. Texture Capital, an institutional market place for private capital, has also been granted approval to commence operations as a digital securities broker-dealer and has the approval to operate an Alternative Trading System. On the other side of the ocean we have China working hard on a CBDC implementation and launching pilots in big tech cities.  As for the implementation of blockchain technology in the financial sector, the second biggest bank by market capitalization China Construction Bank has recently offered $3 billion worth of bonds on the blockchain.

Needless to say, the United States and China aren’t sitting idly by, waiting to be overthrown by the new technologies.

Fomo of the Dutch Banking Association (NVB)

The Dutch Banking Association (NVB) has recently published a report about the Dutch perspective on crypto-assets. The key takeaways of the report are that the NVB sees benefits of blockchain technology in various industries, and particularly in financial services. The association accurately points out that DLT can be an important driver for innovative digital finance, that it allows for more efficiency in various stages of the capital markets and can lead to more financial inclusion.

Key recommendations

The NVB supports the current initiatives of the European Commission:

  • To create a more detailed taxonomy regarding the classification of crypto assets. 
  • Amend existing regulations with any necessary amendments to encourage innovation and foster a level playing field
  • Apply activity-based and technology-agnostic regulation
  • Provide clarification regarding how existing rules will apply to crypt-assets

These initiatives of the European Commission would create a crypto-friendly environment that could promote innovation happing within the EU. 

However, the Dutch Backing Association wants to go even a bit further. The association wants to take the leading position in the development of the European framework for crypto-assets. It is currently, thinking about the following initiatives that should be taken at a national level in the near future:

  • The Dutch regulators need to implement an international taxonomy and rules related to crypto-assets swiftly in order to keep a level-playing field and optimization for proper (inter)national business development.
  • Take a leading position with a Dutch strategy on crypto-assets.
  • Encourage collaboration between regulatory and supervisory authorities, the financial industry, and the crypto industry to work jointly on a legal and innovation framework as part of the Dutch fintech strategy.
  • Lower barriers for Dutch banks to provide custody and virtual asset services provider activities for their customers, in order to facilitate a controlled uptake of the use of crypto-assets while providing proper duty-of-care, KYC/AML, and other regulatory requirements.
European Innovation Scoreboard

On the European Innovation Scoreboard, measured by the European Commission, the Netherlands is in 4th place, which falls in the place of innovation leader. Just behind Sweden, Finland, and Denmark. However, broadly looking at the economic output of each country, the Netherlands comes out on top with a significant margin, NL – $902 billion, DK – $347 billion, FI – $269 billion, SE $528 billion. 

It is in the Netherlands’ best interest to take the lead to secure itself as the frontrunner of innovation so it can influence the outcome.

CBDC and MiCa

The report also touched on the Central Bank Digital Currency (CBDC) and Markets in Crypto Assets (MiCA) subjects by saying that it acknowledges the need for CBDCs and that Dutch Central Bank (DNB) has announced its intention to experiment with a retail CBDC back in April this year. However, it recognizes that CBDCs have very specific characteristics which is why the association chose to exclude it in the report.

Surrounding the new regulatory proposal for Market in Crypto-assets the NVB sees that MiCA tries to aim for a broad scope, however, because of the broad scope, there is still a lot of uncertainty how this will be implemented in practice considering other EU financial regulations if crypto-assets would qualify as financial instruments under MiFID II.

Can’t fall behind mentality

The key recommendations section by the NBV started with the words :

“Countries like the UK, US, France, Germany, and Switzerland have acknowledged the strategic value of crypto assets for their (future) economy and are actively designing their regulatory perimeter to guide and accommodate crypto innovation. Given the potential of crypto-assets, the Dutch Banking Association would welcome initiatives to promote and stimulate innovation at both national and European level” 

The reader can read this paragraph with the intent that the Netherlands can not fall behind the other countries in promoting innovation. At a global level the EU has a performance lead over the United States, China, and Russia. If the EU wants to keep the lead, each member state or the EU itself should have a more active approach in the promotion or stimulation of innovation.

That is one of the reasons why the Dutch Banking Association is pushing hard for the Netherlands to take the leading position in the development of a European framework. Currently, as stated in the beginning of the article, the United States and China are working hard to implement working and practical solutions for the first mover, like Bitcoin, has more chances to dictate the road of the future.

Conclusion

It is clear that blockchain technology is here to stay. The incumbents are already paving the way for the newcomer. With the approval of SEC and FINRA for banks to serve its clients with crypto custody services and approval of Alternative Trading Systems. It’s only a matter of time that blockchain technology will be incorporated in the old financial infrastructures, with a chance of over-taking it entirely. Countries like China, the US, and the member states of the EU are already warming up to the idea of crypto-assets and are approving and running pilots to test the practicality of it. 

No one wants to be left behind and adhere to the infrastructure of what the other countries have developed. That is why Central Banks, countries, and organization that is looking for innovation keeps hammering on clearing existing regulations and lowering barriers to entry for crypto-related companies and endeavours.

Luc Correia Cabrito