The Financial Conduct Authority (FCA) has set out clear expectations for cryptocurrency businesses operating in the UK, outlining the necessary steps they must take to comply with the significant change in the legislation for money laundering prevention that was enacted in 2022.
According to a statement shared by the regulator today (Thursday), come September 1, 2023, cryptocurrency enterprises must comply with the Travel Rule, which necessitates the collection, verification, and sharing of important information pertaining to crypto asset transfers.
The Travel Rule
The Travel Rule emerged in response to the growing need for transparency and accountability within the realm of cryptocurrency transactions. By making it mandatory for crypto asset companies to share pertinent information about transfers, this new legislation seeks to curb the potential misuse of digital assets for illicit purposes.
Notably, the Financial Action Task Force (FATF) champions the adoption of the Travel Rule across jurisdictions, aiming to standardize crypto practices akin to the well-established rules in the broader financial services sector, the FCA stated. The rule promotes anti-money laundering and counter-terrorism financing measures.
As the implementation deadline draws near, UK cryptocurrency companies are bracing themselves for the changes that the Travel Rule will bring. The FCA has outlined a set of expectations that crypto asset firms need to adhere to, highlighting the importance of exercising due diligence and taking reasonable steps to ensure compliance.
Adapting Business Processes
Some of the major industry players have already paused their operations in response to the new regulations. Finance Magnates reported yesterday (Wednesday) that PayPal was temporarily suspending cryptocurrency sales for users in the UK for at least three months beginning October 1. In a statement addressed to its customers, the payments giant emphasized commitment to compliance, assuring customers that they can still hold or sell their existing crypto holdings.
For instance, when sending or receiving crypto assets transfers within the UK or to jurisdictions that have embraced the Travel Rule, complete adherence becomes necessary, the FCA noted. However, in cases where transfers are made to jurisdictions that are yet to adopt the rule, companies are required to establish whether the recipient entity received the mandated information.
Additionally, in June, the FCA announced robust new rules for marketing cryptocurrencies in a bid to bolster consumer protection and foster informed decision-making within the industry. Effective from October 8, 2023, these rules encompass a range of measures, including the introduction of cooling-off periods for first-time crypto investors and a ban on ‘refer a friend’ bonuses.
