Her Majesty’s Treasury has said it is reviewing its proposal for users and virtual assets service providers (VASPs) to collect and report personal data for digital currency transactions involving unhosted wallets as part of Financial Travel Rules (FTRs).
The change in stance is coming from consultations the Treasury department launched in July 2021 with the financial industry to amend the U.K.’s Money Laundering Regulations (MLRs).
It published the consultation findings this week in a document titled “Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 Statutory Instrument 2022.”
The Exchequer stated that it had not found enough evidence of unhosted wallets posing a more significant risk for illicit use of digital assets to warrant pushing through with the proposal.
“The government does not agree that unhosted wallet transactions should automatically be viewed as higher risk… and there is not good evidence that unhosted wallets present a disproportionate risk of being used in illicit finance,” the report said.
The Treasury further explained that many people who use unhosted wallets do so to benefit from their customizability and security advantages. However, the amendment is not entirely scrapping the travel rule, as doing so will incentivize criminals.
Businesses will still be required to collect and report information for transactions that pose an elevated risk for illicit finance. The criteria for identifying transactions that fall in this category will be properly spelled out in the completed AML/CTF Statutory Instrument (SI) the department will publish later this month.
U.K. intends to become a digital assets hub by providing regulatory clarity
Other digital currency-specific changes that will be coming in the AML/CTF rules include the reporting threshold of €1,000 ($1,055) recommended by the FATF. The Treasury says these rules are “time-sensitive” and will bring the U.K.’s AML/CTF rules to international standards.
The recommendations will also be reflected in bills in the U.K.’s parliamentary agenda targeting digital assets. Previously, the Treasury also published its proposal for regulating stablecoins. The proposal introduces an insolvency regime for stablecoin issuers.
The developments align with the country’s ambition to become a global digital currency hub. While speaking with Bloomberg, U.K.’s digital minister Chris Philip shared that the country wants to become a digital assets hub devoid of criminals.
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