On January 24, 2018, the central bank of the Netherlands (DNB) released a statement addressing cryptocurrencies and blockchain technology. It expressed support for blockchain technology and explained it has been studying how it might best be used since 2015. While acknowledging there are inherent investment risks in the evolving cryptocurrency sphere, it states it “is currently not in favor of a ban on cryptos.”
DNB Supports Crypto-Exploration and Regulation, Not Bans
DNB begins the statement by explaining it is in favor of innovation; “New entrants and technologies enrich users’ choices and put pressure [on] existing players to also innovate.” It has studied blockchain technology for several years and has already built four prototypes of digital currencies, purely for research purposes. In a separate post on DNB’s site, it also mentioned building a “test network” to gain understanding and practical experience with blockchain technology. It acknowledges that central banks issuing their own currencies and keeping data in a blockchain network are possibilities.
DNB also said in January that it does not currently consider virtual currencies money and sees the cryptocurrency market as “relatively limited” in size when compared to the dollar and euro. It does not support nationwide bans because the international nature of the crypto ecosystem would make them hard to enforce. Also, “given the very limited size of the crypto market in relation to the entire economy, a heavy measure would obstruct innovation unnecessarily.”
The Dutch bank recognizes that cryptocurrencies face challenges in terms of governance, maturity, speed, and ease of integration with established institutions. It supports the EU having extended its anti-money laundering directives to include digital money in 2017. This 2018 statement expresses that DNB thinks lack of regulation and supervision in the crypto-sphere can put investors at risk and that it warned the public accordingly “as early as 2013.”
DNB endorses the blockchain’s possible use for payments, securities transactions, and document and identity validation. “Currently, DNB is investigating whether to perform a combination of services where cryptos are converted to euros (or other currencies)” it stated, adding that a payment service and prepaid crypto debit cards might also be possible. Any such services would “fall under the scope of current financial supervision legislation and be subject to licensing.”
Other Dutch Blockchain Developments
The DNB’s investigative approach to virtual currencies is not surprising, given that the Dutch government has been actively pursuing the integration of blockchain technology for years. Over 30 pilot projects were carried out between 2016 and 2017, into areas including taxes, the justice system, and digital identities.
Also, a Netherlands-based research project made waves recently by using human-powered energy (body heat) to mine digital assets.