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The Dutch financial regulator, The Netherlands Authority for the Financial Markets (AFM) has published a letter addressed to new and currently existing institutions invested in cryptocurrencies. The letter seeks to inform that certain cryptocurrency investment activities may require licensing from the AFM, however, expresses âserious doubtsâ as to âwhether managers of investment institutions in cryptos can meet the requirements for licensing.â
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Dutch Financial Regulator Issues Letter to Investment Institutions Operating With Cryptocurrencies
The letter seeks to address individuals seeking to apply as an administrator of an investment institution in cryptos, in addition to âexisting [âŠ] administrator[s] of an investment institution active in cryptos, or [individuals] planning an investment institution to manage cryptos.â
The AFM states that it is placing the âheavy requirementsâ on institutions investing in cryptocurrencies due to âstrong concern[s]â as to whether managers of investment institutions who invest in cryptos are able to meet the full licensing requirements. The AFMâs concerns principally regard âthe sharp increase in interest in new market parties to provide these services in combination with the usually limited knowledge about applicable regulations,â which generally results in âignoranceâ as to how to meet âsupervisory standards in practice.â
The AFM also requests that investment institution inform the agency regarding âany desired expansion of [cryptocurrency] product offering[s]â well in advance of providing such.
Licensing Requirements for Dutch Investment Institutions
The AFM to clarify what circumstances in which the administrator for an investment institution will be required to seek licensing from the regulator. The letter states that the âthreshold value for an administrator of (an) open-end investment institution (s) [is] âŹ100 million [approximately $1,162 million USD].â
âAn administrator of an investment institution must obtain a number of important licenses to [meet] licens[ing] requirements,â the AFM continues. âThese requirements are intended to include to protect the interests of retail investors and to ensure the proper functioning of retail investors market. No distinction is made between different forms of investing.â
The AFM has âdrawn up a number of questionsâ that administrators of institutions invested in cryptocurrencies will be required to answer in order to apply for the required licensing. Said requirements pertain to the institutionâs liquidity management, valuation protocols, the product development process, and storage considerations.
What is your response to the AFMâs new licensing apparatus for institutions invested in cryptocurrencies? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, www.afm.nl
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