Dutch exchange pulls the emergency brake: the platform operator circumvents strict EU rules by relocating to Panama.
Exchange reacts to tighter rules in the EU
The small country of Panama remains familiar to many consumers for better or worse. The so-called “Panama Papers” revealed how numerous large investors and corporations used the jurisdiction—often through shell companies—to shield assets from domestic tax authorities, shifting the burden onto taxpayers in many other countries. At the same time, Panama is attractive for its legal openness toward business models that are coming under increased scrutiny in the EU. The recent move by derivatives exchange Deribit underlines this trend. As a provider of crypto derivatives trading for digital currencies ranging from Bitcoin to Zcash, the operator has been particularly known to industry professionals.
Fight against money laundering and end of anonymity cited as reason for the move
The decision has now been made: the Dutch crypto derivatives exchange operated by Deribit B.V. is relocating and has chosen Panama as its new base. The company cites the increasingly strict legal environment in the European Union as the reason. At issue are international anti-money laundering (AML) rules, which many jurisdictions beyond the EU are gradually implementing. Equally important are the stringent requirements for identifying platform users under KYC regulations—known as “Know Your Customer.” These rules are expected to be applied through state regulation to many types of crypto services in the future, ranging from wallet providers and exchanges to platforms offering trading in crypto derivatives.
Many countries aim to provide legal clarity for the crypto market
There is little time between the announcement and the execution of Deribit B.V.’s relocation. According to the exchange’s latest statements, management and responsibility will be transferred to the subsidiary DRB Panama Inc. on February 10, 2020. Even if the Netherlands-based company may not be one of the industry’s largest household names, the new regulations—such as those arising from national blockchain strategies and reporting obligations enforced by financial regulators like BaFin in Germany—could have significant consequences. If critics are proven right, many other service providers based in Europe may also consider moving their headquarters to jurisdictions with lower regulatory burdens.