UK Government Makes U-turn on Unhosted Crypto Wallet Transactions

UK Government Makes U-turn on Unhosted Crypto Wallet Transactions

• HM Ministry will no longer require identification details from every fund transfer in private crypto wallets.
• They decided based on a consultation with 94 responses.
• The government didn’t wholly absolve unhosted wallets from all oversight functions.

The government of the United Kingdom will no longer require identification details from every sender and recipient of funds in private crypto wallets. This update came via a recent report from Her Majesty’s (HM) Treasury, the government’s economic and finance ministry.

In July last year, the Treasury said, “Crypto asset firms will need to put in place systems for ensuring that personal information of the originator and beneficiary of a crypto asset transfer is transmitted and received alongside the transfer.”

Layer on the ministry launched a consultation entitled “Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 Statutory Instrument 2022” The consultation closed on October 14, 2021, with HM Treasury receiving 94 responses from a wide range of respondents. Based on the feedback, the government modified its proposals concerning unhosted wallets. The new document reads:

Instead of requiring the collection of beneficiary and originator information for all unhosted wallet transfers, crypto-asset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance.

The government now believes that unhosted wallet transfers are not automatically high-risk transactions since many people hold crypto-assets there for legitimate purposes, like their customizability and potential security advantages.

Nevertheless, the government did not wholly absolve unhosted wallets from oversight functions so as not to create an incentive for criminals to use them to evade controls. The Ministry concluded that the minimum factors in determining risk would be set out in the legislation.

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