The Financial Conduct Authority (FCA) of the UK has laid down the law for crypto businesses operating within its jurisdiction. Starting September 1, 2023, these businesses are expected to fully comply with the Travel Rule, which mandates transparency in all crypto transfers.
This rule’s origin can be traced back to a change in the UK’s money laundering legislation in July 2022. Under the Travel Rule, crypto businesses are required to collect, verify, and share information related to crypto transfers. The primary objective behind this rule is to curb illegal activities by strengthening global anti-money laundering and counter-terrorist financing measures.
The FCA’s guidelines are clear: crypto businesses must take “all reasonable steps” to adhere to the rule. This applies even when they are using third-party suppliers for sending or receiving crypto transfers to a firm in the UK or any other jurisdiction that has implemented the Travel Rule.
But what exactly is the Travel Rule? It’s a directive that mandates crypto businesses to gather, verify, and share details about crypto transfers. The rule aims to bring about a sense of order and transparency in the crypto world, ensuring that illicit activities are kept at bay. The Financial Action Task Force has urged other jurisdictions to swiftly implement this rule, aligning crypto transaction practices with standards observed in other financial sectors.
For UK firms dealing with regions that haven’t adopted the Travel Rule, they must ascertain if the recipient firm can access the necessary information. If not, these firms are obligated to collect, validate, and store the required data as per the Money Laundering Regulations before initiating the transfer.
The FCA, in collaboration with the Joint Money Laundering Steering Group and HM Treasury, is in the process of drafting additional guidance to assist firms in complying with the Travel Rule. Feedback from UK firms on this guidance is open until August 25.
This move is part of a broader effort to tighten regulations in the UK’s crypto sector. The FCA has announced that the upcoming financial promotions regime in October aims to “better protect people, the integrity of our markets and support the sustained competitiveness of the crypto asset sector in the UK.” Last month, the FCA cautioned that crypto memes violating these financial promotion rules could face hefty fines and even imprisonment.
Despite these stringent regulations, UK Prime Minister Rishi Sunak has expressed his desire to transform the country into a web3 hub. In a statement, Sunak’s office emphasized the importance of embracing innovations like web3, powered by blockchain technology, to boost the economy.
