Washington D.C.-based cryptocurrency advocacy group Coin Center has urged Her Majesty’s Treasury not to over-broaden its anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. Such an expansion would violate UK citizens’ free speech and privacy rights, the center argued in a comment letter submitted to the HM Treasury.
The HM Treasury recently outlined a planned transposition of the European Union’s Fifth AML Directive (5MLD) into national law. Coin Center responded to the transposition during its public consultation phase, highlighting the dangers that come with the addition of provisions that will apply to the cryptocurrency industry.
The U.K. has so far been one of the most progressive nations when it comes to cryptocurrency regulations, the center began. The HM Treasury has partnered with the Financial Conduct Authority (FCA) to develop a reasonable and flexible regulatory regime for the crypto industry. This has made the U.K. “a welcoming home for blockchain innovation while simultaneously addressing key policy issues such as consumer protection, prudential regulation, and crime prevention. Indeed, the U.K.’s approach has been cause for envy from innovators in the US and other nations.”
However, with the planned broadening of the 5MLD regulations, the U.K could stifle innovation in the financial services industry, Coin Center argues. They were especially critical over the inclusion of peer-to-peer exchange providers as well as the inclusion of persons engaged in the publication of open source software. Such an action would be severe overreach, the center stated adding, “It would, in effect, necessitate a gross curtailment of free expression within the U.K and impose an arbitrary electronic surveillance regime unbounded by law and due process.”
Coin Center further reminded the Treasury that the European Convention on Human Rights (ECHR) and the International Covenant on Civil and Political Rights (ICCPR) prohibit intrusions upon the privacy of persons.
It added: “The imposition of financial surveillance upon every user of cryptocurrency, regardless of their particular circumstances, would fail to meet this standard and would, therefore, not be in keeping with the ICCPR and the ECHR.”
While Coin Center’s intention is to protect the crypto industry from the risk of overregulation, it’s crucial to note that some of the regulations it argues against could end up being the same ones that foster the development and maturity of the industry. For instance, the center opposes a widened scope to include software providers, who offer programs such as mixers and tumblers.
However, as has been witnessed by the closure of some mixing platforms, the most recent of which is Bestmixer, these too can be exploited for criminal purposes. Europol announced that the BTC tumbler had achieved a turnover of over $200 million in its one year of existence, but much of it had been for money laundering purposes. This is one of the risks that the U.K. regulators will have to consider as they decide the extent to which the 5MLD will apply.
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