Dutch bitcoin (BTC) exchange Bitonic has filed for a preliminary injunction at a Rotterdam court in a bid to suspend a wallet verification rule enacted by the De Nederlandsche Bank (DNB), the country’s central bank. The platform said its decision is motivated by the fact that the imposed know your customer’s counterparty (KYCC) requirements force it to violate the privacy of its users. (Updated at 18:10 UTC: a new section – ‘Dozens of complaints’ – added.)
Last November, the DNB registered Bitonic as a provider of cryptoservices, making the registration conditional and requiring the platform to introduce special control measures. These were to be used to verify the possession and use of wallets and crypto-addresses by Bitonic’s customers.
At the time of the registration, the exchange claimed it was obliged to verify user identities through passports, ID cards, and/or driving licences, and link BTC wallets to identities similarly to how banks set up individual bank accounts for their customers.
Also, DNB requires that in “transactions to and from external wallets, crypto service providers must be able to effectively screen the identity of a relationship with a person or legal entity as referred to in the sanctions regulations.”
“We introduced these measures under protest and explained that in our in view, the requirement lacked a proper legal basis. This is confirmed by an independent expert advice by Bökkerink Compliance International that we received this week,” the platform said. Bökkerink Compliance International says it is a Netherlands-based consultancy and advice company in the area of compliance and integrity with a focus on the financial and non-financial sector.
Bitonic claimed it did “not receive a convincing answer to the fundamental questions we raised on this matter during the registration process,” and is still awaiting a reply to a letter 25 out of the 38 registered cryptoservice entities sent to the DNB last November.
“Meanwhile, we are for some time now, forced to work in a way that violates privacy rules. To avoid doing so, we asked DNB again, early this year, to revoke the requirement. This request was denied with a referral to the Sanctions Act. However, we do not agree with that explanation,” according to the platform.
“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,” the firm said.
‘Dozens of complaints’
Simon Lelieveldt, Compliance Advisor at Bitonic, told Our that the exchange regretted to be in a position in which it had to challenge its supervisor in such a way.
“We have repeatedly tried to discuss the matter and seek reconciliation by taking the time to discuss the matter properly, but were unable to convince our supervisor to delay or postpone the specific requirement which in our view forces us to violate the European privacy regulations,” Lelieveldt said.
In Bitonic’s view, the requirements have exerted a negative impact on its business, and some customers have stopped using the exchange’s services because of them.
“We have had quite some responses and complaints by our customers who dislike the KYCC requirement, dispute its effectiveness and stop doing business with us. At the same time, as we announced our intention to lay this matter before the judge, our customers were very supportive and expressed their hope that the judge would also recognize the urgent Data Protection Issues at stake,” according to Lelieveldt.
“We had literally dozens of complaints on the privacy infringement that this requirement constitutes and have included anonymously a selection of those complaints in the court proceedings,” he said.
Following the latest move, the next step for the exchange is to await the court’s decision on the acceptability and timing of the case.
“This is in the hands of the judge and we don’t have any further information on that right now. Legal proceedings will be delayed however due to the coronavirus situation, so this may take longer than we wish for,” according to Lelieveldt.
Set up in 2012, Bitonic claims it is the first BTC-focused business to be established in the Netherlands.
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