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Bitonic files preliminary injunction against self-hosted wallet KYC in the Netherlands

  • Bitonic has taken counter-action against self-hosted wallets verification rule.
  • The broker has previously called the rule a nuisance.
  • Bitonic says it can comply with money-laundering and sanction rules without infringing on people’s privacy.

The largest bitcoin broker in The Netherlands is challenging the rule by the central bank requiring exchanges to collect Know-Your-Customer (KYC) information of clients withdrawing their crypto to self-hosted wallets.

The verification rules were drafted by the country’s regulators in November 2019 and passed into law a year later.

The new rule requires cryptocurrency service providers to check if the account holders or their beneficiaries are on a “Dutch or European sanctions list” before providing services.

Bitonic files preliminary injunction

Bitonic filed a preliminary injunction to counter the wallet-verification rule imposed by the Dutch central bank (DNB).

“That is why we decided this week to urgently file a preliminary injunction at the court in Rotterdam in order to suspend the wallet-verification requirement of DNB,” announced Bitonic after filing a preliminary injunction.

The main reason for the injunction is to suspend the “comprehensive processing of data” and return to the situation where they determined, at their own discretion, if and when customers are flagged for risk purposes and required to provide proof of the management of their wallets.

The exchange further noted that it is important to comply with anti-money laundering and sanction rules and still respect human rights.

In addition to adhering to investigation laws, we also see it as a legal obligation to respect human rights.”

The DNB is not playing ball

The broker claims that the central bank is not fully playing its part in resolving this matter. Bitonic has not yet received convincing responses to the fundamental questions it posed to the central bank during its registration process.

Bitonic was granted a registration license by the DNB on Nov. 17, 2020, on the condition that the broker would introduce extra control measures to verify self-hosted wallets. They complied with the condition even though it was under protest.

The broker claims that it has been forced to work in a way that violates privacy rules and to avoid doing so, they asked the central bank to revoke the requirement. The request was denied with a reference to the Sanctions Act.

Bitonic not pleased with the rule

Bitonic has not publicly expressed its displeasure at the new rule. In November last year, the broker asked its clients to comply with the “nuisance policy” of the central bank.

Cryptocurrency exchange Bitstamp recently introduced verification rules for its Dutch customers withdrawing to external wallets.

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