U.K. to Put Magnifying Glass on Crypto Transfers

Digital asset companies will have to collect and transmit data on cryptocurrency transfers under new rules from the U.K.’s financial regulator, as the country implements a law intended to stop the movement of digital assets for illicit activity.

U.K. crypto operators will be expected from Sept. 1 to comply with what is known as the Travel Rule, a multicountry push aimed at thwarting criminal uses of digital assets such as money laundering and terrorist financing, the U.K.’s Financial Conduct Authority said Thursday. 

But the agency said companies can continue to send digital assets to and receive them from jurisdictions that haven’t implemented the rule, under certain conditions. 

The U.K. has in recent months grappled with its crypto regulation under Prime Minister Rishi Sunak, who in the past has championed digital assets. Some in the industry have welcomed increased government oversight as a road to legitimacy.

The Travel Rule expands to digital assets wire transfer requirements from the Financial Action Task Force, a global anti-money-laundering watchdog. Under the rule, crypto industry players handling transactions must collect and transmit specific information on the origin of funds and their beneficiaries, as is already the case for traditional money transfers.

FATF noted in June its “serious concern” that many countries had failed to pass legislation to implement the rule. The U.K.’s implementation of the rule, which puts in force legislation from 2022, doesn’t cut off those jurisdictions.

Under the U.K. rule, crypto operators are expected when sending assets to jurisdictions without the rule to collect and store information as required under anti-money-laundering rules. When receiving assets from those jurisdictions, they will be expected to conduct a “risk-based assessment” on whether to release the assets to the intended beneficiary. 

The rule applies even when crypto companies use third-party suppliers.

CryptoUK, an industry trade body, said the FCA communication, though welcome, doesn’t address all of the outstanding compliance concerns, including issues stemming from jurisdictions being out of regulatory sync.

The FCA is soliciting input on its Travel Rule guidance and has given firms dealing in crypto assets until Aug. 25 to make submissions.

Write to Richard Vanderford at [email protected]