Retail cryptocurrency investors are increasingly circumventing identity verification rules by purchasing second passports from tax havens like Palau or using artificial intelligence to forge identification documents.
This trend allows traders to access unlicensed crypto exchanges that offer highly speculative and risky investment products, according to reports from Het Financieele Dagblad.
The Dutch Authority for the Financial Markets (AFM) has expressed concern over the growing sophistication of these evasion tactics.
By bypassing standard know-your-customer (KYC) protocols, investors expose themselves to significant fraud risks while undermining regulatory oversight.
The use of AI-generated documents represents a new escalation in the cat-and-mouse game between regulators and illicit market participants.
This development occurs as the European Union intensifies its enforcement of new cryptocurrency regulations, targeting thousands of firms operating without proper authorization.