The United Kingdom is proactively engaged with the crypto industry. Hence, it needs regulations and a framework to work within. The Financial Conduct Authority (FCA) has clarified that cryptocurrency is legal in the country. It has issued the framework for its work.
The registration of crypto firms with FCA in the U.K. is mandatory from 10 January 2020 and complies with anti-money laundering (AML) regulations. These regulations are further extended to Financial Action Task Force (FATF) requirements for Virtual Asset Service Providers (VASPs) in the UK.
The 12-month grace period has been granted for VASPs which has started from July 21, 2022. Hence, the rule came into effect on September 1, 2023. According to the rule, UK VASPs have to give all the details related to the transactions irrespective of the amount. More data is required for the transactions that include at least one counterparty outside the UK and more than 1,000 euros in crypto assets.
Other Details Related to Crypto Rule
The rule also includes the personally identifiable information (PII) that must go with the crypto assets transfers. If the transfers are UK-based, then less PII is needed as compared to the international transfers. The beneficiary VASP can request additional information within three working days.
Self-hosted wallets do not require the information as they already have the stored information. However, for risk management, VASPs may request the missing information. They can demand the relationship with the customer or how many times the amount has been transferred etc.
The receiver VASPs have more responsibilities while receiving the crypto assets. They must confirm that all the required information is fulfilled. Also, they can match information with their customer’s due diligence record.
If any suspicious case arises due to wrong information, then they can take steps which may include returning the finds as well. They must report to the FCA about the information and steps taken as a response.
The regulators confirm that this step will secure the industry against illicit activities. The execution of the rule is done and the results will be visible after some time. The UK is not alone in implementing this rule. Other countries that have taken this step include the U.S., Germany, Japan, and Singapore.
The UK travel rule is in action which includes the VASPs to report all the information related to the crypto transfers. FATF has issued a guideline that includes gathering, verifying, and sharing specific details with crypto transfers. It simply means that the paperwork is increased to conduct a risk-based assessment. However, the digital asset sector will be safeguarded due to this implementation.