The benefits of blockchain – or distributed ledger technology (DLT) – have been widely accepted and its use as a key technology is being promoted in various industries. Particularly in financial services, DLT can be an important driver for innovative digital finance. It allows for more efficiency in the various stages of the capital markets transaction lifecycle (from trading to settlement), more financial inclusion, increased access to financial products and higher resiliency of market infrastructure. One of the most promising areas utilizing DLT is crypto-assets.
As the European Commission emphasizes, crypto-assets have the potential to bring significant benefits to both market participants and consumers. For instance, initial coin offerings (ICOs) and security token offerings (STOs) allow for a cheaper, less burdensome and more inclusive way of financing for small and medium-sized companies (SMEs), by streamlining capital-raising processes and enhancing competition. The so-called ‘tokenization’ of traditional financial instruments is also expected to open up opportunities for efficiency improvements across the entire trade and post-trade value chain, contributing to more efficient risk management and pricing.
A number of promising pilots and use cases are being developed and tested by new or incumbent market participants across the EU. Provided that platforms based on DLT prove that they have the ability to handle large volumes of transactions, it could lead to a reduction in costs in the trading area and for post-trade processes. If the adequate investor and consumer protection measures are in place, crypto-assets could also represent a valuable new asset class. Payment tokens could also present opportunities in terms of cheaper, faster and more efficient payments, by limiting the number of intermediaries.
The Dutch Banking Association (NVB) have published their recommendations in a position paper that can be downloaded from the website. The aim of the document is to give better insight in the potential of crypto/digital assets and associated risks, the benefits for the Dutch economy and the need to facilitate more innovation in digital finance.
For the Dutch economy to benefit and assume a leadership position, we propose concrete measures to stimulate innovation and create a clear regulatory framework. At a minimum, Dutch regulators should aim for a harmonized regulatory framework at European level and ideally at an international level. As a lot of business development is done in consortia with international parties, creating the need for a level playing field across Europe and reducing fragmentation across member states is key.
Countries like the UK, US, France, Germany and Switzerland have acknowledged the strategic value of crypto assets for their (future) economy and are actively designing their regulatory perimeter to guide and accommodate crypto innovation. Given the potential of crypto-assets, the Dutch Banking Association would welcome initiatives to promote and stimulate innovation at both national and European level.
The Dutch Banking Association (NVB) supports the current initiatives of the European Commission:
- To create a more detailed taxonomy regarding the classification of tokenised assets as a first step in order to provide regulatory clarity for market participants;
- To amend existing regulation with any necessary amendments or additional guidance where possible to encourage innovation and foster a level playing field, applying the principle of ‘same activity, same risk, same regulation’;
- To apply activity-based and technology-agnostic regulation;
- To provide additional clarification regarding how existing rules will apply to crypto-assets – since they were not originally designed with crypto-assets in mind – for payment, utility and security tokens.
- To align the EU regulatory framework globally for crypto-assets wherever possible in order to sufficiently mitigate the risks.
To take a leading position in the development of a European framework for crypto-assets, the following initiatives should be taken at a national level in the near future:
- Dutch regulators need to implement an international taxonomy and rules related to crypto-assets swiftly in order to keep a level-playing field and optimization for proper (inter)national business development;
- Take a leading position with a Dutch strategy on crypto-assets;
- Encourage collaboration between regulatory and supervisory authorities, financial industry and the crypto industry to work jointly on legal and innovation frameworks as part of the Dutch fintech strategy;
- Map out and adopt best practices for security tokens already regulated under MiFID II, as already seen in other European member states;
- Continue and deepen cooperation with the regulatory sandbox of DNB/AFM (Maatwerk voor Innovatie) in its role as a vehicle for mutual learnings, risk mitigation and business development with new technologies, specifically for crypto-assets;
- Lower barriers for Dutch banks to provide custody and virtual asset service provider (VASP) activities for their customers, in order to facilitate a controlled uptake of the use of crypto-assets while providing proper duty-of-care, KYC/AML and other regulatory requirements.Add paragraph text here.
We believe crypto-assets and tokenization are able to transform our economy and financial
sector. Crypto-assets will be an important accelerator for digital economic growth. This
could significantly impact the financial markets and processes. If so, this will change
the way individuals, companies and institutions transact and share value with each other,
also across borders.
The Netherlands aims to be a frontrunner in fintech innovation10, with a thriving start-up
scene of more than 600 fintech companies. Several partnerships such as Dutch Digital
Delta, the Dutch Blockchain Coalition (DBC) and 2Tokens connect industry sectors,
governments, knowledge institutions, corporates and start-ups to accelerate and drive IT,
technologies and innovation in a ‘typical Dutch collaborative setting’. Dutch banks and
insurance companies are actively embracing innovation and are collaborating with fintech
start-ups and other collaborative partnerships.
this article was published on the website of the Dutch Banking Association (www.nbv.nl)