Deribit relocates to Panama ahead of tougher EU AML rules

Today is the official deadline for EU member states to adopt the Fifth Anti-Money Laundering Directive (AMLD5), and Deribit isn't playing ball

Netherlands-based crypto derivatives exchange Deribit announced yesterday that it will be leaving its native Holland and setting up operations in Panama instead.

The move comes just in time for Deribit to avoid tighter EU regulations regarding anti-money laundering (AML) procedures coming into effect today, January 10.

All of the European Union’s 28 member nation-states must now adopt the Fifth Anti-Money Laundering Directive (AMLD5).

This means that cryptocurrency exchanges and custodial service providers in the EU must register with their local regulator and prove that they can meet their compliance burdens through stringent KYC and AML procedures.

They must also be prepared to share customer data with law enforcement authorities, financial intelligence units, and other financial institutions. This would mean that Deribit would likely have to provide significant personal data on its users.

In an official statement on the company’s blog, Deribit BV said it would delegate its trading platform to its Panama-based daughter company DRB Panama Inc from February 10. The company stated:

“We believe that crypto markets should be freely available to most, and the new regulations would put too high barriers for the majority of traders, both regulatory and cost-wise.”

This means that the exchange will escape the upcoming requirements that force cryptocurrency exchanges in the EU to update their KYC policies or relocate – and which may even force some companies out of business.

Implementing AMLD5 across the EU is not an easy feat

While the official deadline for the implementation of AMLD5 is today, there’s still a decent amount of uncertainty over how the regulations will be implemented in each separate EU member country.

AML practices when it comes to cryptocurrency vary throughout Europe. For example, France has one approach, Germany has another, Malta has another still, and so on.

The upcoming Brexit in the UK will also cause an additional layer of complexity when it comes to implementing data sharing requirements through the so-called ‘travel rule’.

While it appears that the Netherlands will miss the official deadline, the country still pertains to the EU. This causes too much uncertainty for Deribit to continue operating there.

Updating its KYC policy

As well as the move to the tropical Central American country well known as a fiscal paradise, Deribit will be making changes to its KYC policy.

Moving forward, the crypto derivatives exchange will be working with software firm Chainalysis and verification and payment company Jumio.

Deribit will provide a tiered KYC structure, making it easier to onboard users. It will require different levels of KYC based on customer activity.

The future of exchanges in Europe

While Malta has managed to carve out a name for itself as a hub for key cryptocurrency exchanges, including Binance and OKEx, the fact remains that it pertains to the EU.

It may take some time for the regulations to trickle down to member states. However, AMLD5 will certainly place a strain on cryptocurrency exchanges based in the EU.

It remains to be seen whether other cryptocurrency exchanges will seek to achieve compliance or follow Deribit’s lead and relocate to friendlier shores.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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