EU Currents: The Netherlands’ Big Bet On Crypto
Brian J. Tromp
A New Financial Powerhouse?
The rise of the crypto economy is manifesting across the world. Within the European Union, the Netherlands is quickly positioning itself as a leader in the crypto sector, quickly outpacing fellow EU counterparts like Germany and France.
Demand for cryptocurrency amongst the Dutch public is rising, following in line with European and global trends. Globally, the cryptocurrency market is expected to triple in size, reaching $20 trillion in valuation, by 2031. Europe’s overall interest in crypto is strongly represented by the Netherlands, and they are consistently ranked as one of the most rich and appealing markets for cryptocurrency.
A Staggering Rise
Six years ago, crypto holdings across the Dutch economy totaled just 81 million euros, however, as of last October, that number has risen to over 1.2 billion euros, an increase of 120%. The largest share of this total is held within Dutch households through either crypto ETF’s (Exchange Traded Funds) or ETN’s (Exchange Traded Notes).
ETF and ETN holdings within Dutch households add up to 395 million euros, with further crypto investment being held within pension funds. Pension funds based in crypto are valued at over 287 million euros, further driving up the overall crypto holdings in Dutch households.
Within the EU, crypto currency trade volumes have skyrocketed in recent years. In November 2024, crypto exchanges that utilized the euro as the primary currency saw their weekly trading volume rise to 12 billion euros.
Pursuing Growth Through Regulation
The growth of the crypto market in the Netherlands has resulted in strict regulations being proposed and enacted by the Dutch Finance Ministry. Instead of stifling innovation, as free market advocates might claim, the regulations have resulted in the opposite effect.
Going back to 2020, the Ministry of Finance has nurtured the fintech industry in the Netherlands. In that year, a “fintech action plan” was announced, setting up resources that would spur growth within the sector.
Established regulations authored by EU leadership worked in tandem with local regulations to spur growth and encourage trust amongst consumers. The Markets in Crypto Assets scheme came into force in June 2023, providing legal clarity, protection for consumers and guaranteed oversight.
The result of these mandates had an immediate effect. The quantity of fintech firms within the nation jumped from 645 to 861 in just four years; progress within the sector incentivized further contributions from the ministry, along with a commitment to nurturing a growing job-building network.
Growing Calls For New Legislation
Like with many rising trends, especially within the technology arena, younger members of society are flocking to crypto. Within the Netherlands, young investors are purchasing Bitcoin and Ethereum as long-term investments.
With respect to investments, Dutch lawmakers have been pursuing an additional set of regulations for cryptocurrency. A bill has been advancing through the Dutch parliament that would place taxes on unrealized gains of cryptocurrency holdings.
The bill, known as the Box 3 Actual Return Law, would be the first of its kind in the crypto world and may have potential long-standing effects on the future of cryptocurrency in the Netherlands. One of the most contentious aspects of the bill involves how the tax would be applied to crypto assets.
The tax would be levied on any increase in valuation, regardless of whether the crypto currency has been exchanged for fiat currency. Critics argue against this bill, stating that crypto is much too volatile to tax unrealized gains (whereas more traditional holdings are only taxed for realized gains). Additionally, there are fears that taxing cryptocurrency in this manner could drive down the growth of the Dutch crypto industry.
This move is part of a broader phase of governments exacting greater scrutiny of the crypto market. Though actions to strengthen consumer protections and bolster confidence have been well-received, this move to possibly throttle gains within such a dynamic sector has left some fearing negative effects on the industry if these laws come to pass.
The tax laws are expected to come into effect on January 1st, 2028, with the initiation of a 36% flat tax rate on liquid stocks like crypto.
Protecting Investors, Pursuing Predatory Practices
The increased scrutiny on crypto in the Netherlands is not without justification. As stated earlier, the Dutch government has laid out numerous frameworks for regulation within the industry; however, they have not always been perfect.
Many crypto exchanges operate on the fringes of the regulations set forth by the Netherlands Authority for the Financial Markets. Representatives from the AFM have advised consumers about exchanges with shady practices, but there are thousands of Dutch consumers that already have capital sunk into these exchanges.
The exchanges that have raised the most alarm for the AFM are MEXC, BitMEX and Toobit. These exchanges often offer new customers a purported 600% interest return on their deposits, or bonuses of $5,000 for new customers, in the case of Toobit.
What has hindered Dutch regulators to this point is two things. Firstly, it takes time for cases of financial fraud to be built, fines against the offending businesses are not even an option as those would require a consistent complaint log. This process often takes years to establish a proper paper trail.
Most of the difficulties also stem from where these exchanges are located. BitMEX and Toobit operate out of the Seychelles, a known tax haven. Pursuing businesses in these locales comes with its own set of issues, as the local laws that the businesses operate under allow a strong level of financial secrecy.
A Positive Outlook
Though the Netherlands is one of the smallest nations in the EU, their commitment to growing a robust crypto economy already has them punching above their weight as a presumptive future financial giant in the EU.
With a population that has already embraced a booming fintech economy and is committed to ensuring that the crypto economy operates in an ethical manner, the Netherlands’ investment in adopting the blockchain economy could end up being a major success story in the crypto world.
