Dutch financial authority raises doubt over legality of crypto investments

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Cryptocurrency investors are faced with another quandary after the Netherlands Authority for Financial Markets (AFM) expressed “serious doubts” over whether entities that are dealing in cryptocurrencies actually conform to licensing laws.

In a letter to market participants, the AFM said that risks associated with cryptocurrencies may mean that these companies could actually fall short of their licensing obligations. According to the financial regulator, it “has serious doubts, partly because of the risks associated with cryptos and their management.”

Interestingly, cryptocurrency investment is not subject to any form of regulation under the Netherlands Supervision Act, but certain activities may require the providers to obtain a license from the AFM. So far, there is not much legal clarity over cryptocurrency investments in EU countries with the EU Commission being quite ambivalent on the situation.

When assessing the current landscape for cryptocurrencies, the authorities also claimed that it found what it termed as “a too limited knowledge of these requirements for market parties.” The AFM seems to imply that there is not enough education on cryptocurrency investments to warrant a sane and serene opportunity.

Aside from the risks associated with cryptos, the regulator also raised “serious doubts whether managers of investment institutions in cryptos can meet the requirements for licensing.”

Earlier this month, the Netherlands’ central bank joined what seems to be a growing consensus on blockchain’s current shortcomings, announcing the technology implementations available are “not sufficiently efficient” to service the banking sector.

Still, a government report released in May considered cryptocurrency to be broadly “low risk” in relation to financial stability. The amount of hacks such as the Bitgrail incident, fraudulent ICOs and other general situations such as exchange hacks have dealt a severe blow to the credibility of the markets in general that has seen a decline of over 80% for several cryptocurrencies since the all-time highs in January.