De Nederlandsche Bank (DNB) has warned the public that MEK Global Limited (MGL), serving in the Netherlands as KuCoin, has been operating without approval from the central bank.
The DNB disclosed on December 15, alleging that the firm is not in compliance with the Anti-Money Laundering and Anti-Terrorist Financing Act. The warning also claims that KuCoin has been “illegally offering services for the exchange between virtual and fiduciary currencies and it is illegally offering custodian wallets.”
The warning notes that while customers are not involved in any wrongdoing, the central bank warns that certain bad actors might seize the legal loophole to engage in drug trafficking and terrorism financing using the platform.
“Customers of MGL are not in violation. However, this may increase the risk of customers becoming involved in money laundering or terrorist financing,” the warning read.
Digital exchanges keen on operating in the Netherlands have to seek the approval of the DNB for the issuance of service providers. A search on DNB’s database of approved virtual currency service providers shows that there are less than 40 licensed firms. Bitstamp, Coinbase (NASDAQ: COIN), OKX, and eToro are part of the exclusive list of companies authorized to provide digital asset services to consumers.
A similar warning was issued against Binance Holding Ltd in 2021, claiming that the company was not authorized to operate in the Netherlands after failing to obtain a license. Binance set up another legal entity and settled with regulators after paying a $3 million fine.
KuCoin’s torrid year rolls on
KuCoin has been in the middle of multiple regulatory storms in different jurisdictions worldwide. Following Terra’s implosion in May, KuCoin was inundated with swirling rumors that the exchange would impose a ban on funds withdrawal which the exchange vehemently denied.
“Be aware of FUDs! Not sure who’s spreading these sheer rumors, and what their intentions are, but #KuCoin does not have any exposure to LUNA, 3AC, Babel, etc.,” Johnny Lyu, the firm’s CEO tweeted.
Be aware of FUDs!
Not sure who's spreading these sheer rumors, and what their intentions are, but #KuCoin does not have any exposure to LUNA, 3AC, Babel, etc.
No “immense suffer” from any “coin collapse”, no plan to halt withdrawal, everything on KuCoin is operating well.
— Johnny_KuCoin (@lyu_johnny) July 2, 2022
FTX’s collapse whipped up new fears over the future of the exchange, and this time, the fears were stoked by the U.S. Congress. Ron Wyden, chair of the United States Senate Finance Committee, wrote a letter to KuCoin seeking information on the protections it had to prevent an incident like FTX’s.
A recent report from Mazars, a third-party auditor, revealed that KuCoin’s BTC and ETH holdings were overcollateralized in the wake of the ensuing chaos.
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