The Financial Conduct Authority (FCA) unveiled its comprehensive expectations on how crypto businesses operating in the UK can comply with the newly implemented Travel Rule for transparency in crypto transfers from September 1.
What are the Travel Rule?
The rule was agreed by the global regulator, the Financial Action Task Force (FATF). The Travel Rule mandates that crypto businesses must collect, verify and share information concerning crypto transfers, thereby curbing illegal activities by strengthening global anti-money laundering and counter-terrorist financing endeavors.
The FCA has published new guidelines, stating that it expects crypto businesses to take “all reasonable steps” to comply with the rule when sending or receiving crypto transfers to a firm in the UK or any jurisdiction that has implemented it, even when using third-party suppliers.
The regulator urged crypto firms to make a risk-based assessment to determine if they will make crypto assests available to a beneficiary when receiving funds from countries that have not yet complied with the Travel Rule and with incomplete data.
When sending crypto transfers to jurisdictions without the Travel Rule, UK firms are instructed to also determine if the recipient firm can access the required information. If not, they must gather, validate and store the data as mandated by the Money Laundering Regulations before initiating the transfer. Companies have until August 25 to contribute their input.
The Financial Action Task Force also urged other jurisdictions to swiftly implement the rule to coordinate crypto transaction practices with the standards in other financial sectors.
Stricter Regulations in the UK
The UK has seen tighter crypto regulations recently, although the government has previously mentioned its goal of making the country a Web3 innovation hub. Apart from the Travel Rule, there is the upcoming financial promotions regime in October, also designed for the crypto asset sector. Last month, the FCA warned that crypto memes violating these financial promotion rules risk unlimited fines and up to two years imprisonment.
With these tighter regulations, some companies are moving out of the country. Recently, PayPal announced they would cease crypto purchases in the UK until 2024 due to FCA rules.
