Source| UK Travel Rule
UK Travel Rule: What are the Implications of Legislation?
The UK is taking a proactive approach in regulating UK crypto, and the UK Travel Rule is the latest step in that journey. With the Financial Services and Markets Act 2023, which is a reform bill, the UK government’s crypto stance suggests crypto trading is a regulated activity. Further, the Travel Rule is ensuring that users are safe on UK crypto exchanges, and their funds are receiving the utmost security.
So, what’s the fuss all about? What does the UK Travel Rule crypto say? Let’s find out all the answers in this article!
What is UK Travel Rule for Crypto?
The Crypto Travel Rule of the UK, similar to the traditional banking Travel Rule, is a regulatory framework for monitoring cryptocurrency transactions. The rules were laid down by the UN FATF or the UN Financial Action Task Force in June 2019. However, the UK is one of the only countries till date to have implemented the crypto Travel Rule.
For the UK Travel Rule for crypto, from September 1, 2023 onward UK crypto exchanges and other businesses will be required to record and share information regarding crypto transfers. The FATF has also called on other jurisdictions to bring about the Crypto Travel Rule implementation on priority to bring about a semblance of a global regulatory framework for crypto, and ensure user safety.
What does the UK Travel Rule for Crypto Mandate?
To state briefly and clearly, starting September 1, 2023, UK crypto exchanges and other relevant organisations must collect, verify, and disclose transaction data for the safety of all involved parties. This aligns crypto practices with financial industry standards, aiming for transparency.
Notably, UK crypto organisations are now called the VASPs or virtual asset service providers.
The UK Travel Rule crypto further says that when dealing with jurisdictions without a crypto Travel Rule in place, UK crypto businesses must make reasonable efforts to obtain recipient information. This is because UK crypto exchanges still must comply with anti-money laundering regulations, even if data cannot be obtained.
Moreover, for incoming transfers from non-Travel Rule jurisdictions, UK crypto exchanges and other VASPs can assess risk and decide whether to transfer assets to the beneficiary, enhancing security and transparency in the crypto space.
Why is the Crypto Travel Rule of the UK Necessary ?
Source| Why the crypto Travel Rule of UK is necessary
As the FATF has made quite clear, the UK Travel Rule is supposed to ensure user safety in the crypto trading waters, and make the UK a part of a broader, worldwide crypto regulatory framework. Here’s a quick glance at the purposes of the UK Travel Rule:
- The Crypto Travel Rule will make the UK crypto space safer by implementing strict AML (anti-money laundering) and CTF (counter-terrorist financing) policies.
- The UK Travel Rule means to improve transparency regarding crypto transactions.
- The Crypto Travel Rule UK also brings crypto on par with the traditional financial regulations, so traders have a smooth journey traversing between the two worlds.
- The UK Travel Rule for crypto is meant to protect both users and UK crypto exchanges and other VASPs, while promoting the relevant investments and technologies in the UK.
- Further, as the FCA (Financial Conduct Authority) states, the UK Travel Rule will preserve ‘…the integrity of our markets and support the sustained competitiveness of the cryptoasset sector in the UK.’
Now, as you can assume, all the specifications of the crypto Travel Rule in the UK mean that bad actors will have a hard time in utilising crypto for illegal activities, be it virtual or in the real world. This will, without a doubt, achieve its goal of protecting UK crypto exchanges and users, and creating a bridge between the centralised and decentralised financial worlds.
However, there are a few concerns to consider as well.
Qualms Surrounding UK Travel Rule for Crypto
The UK Travel Rule brings a significant issue for those valuing anonymity in their crypto trades: since now all UK crypto exchanges are required to disclose financial information regarding user transactions, there is a possibility of the violation of user privacy.
Further, the compliance needs might make it difficult for smaller and newer businesses to enter the UK crypto space, so there is a subsequent need now to make sure innovation is encouraged.
On that note, however, the amended Financial Services and Markets Act shows that the UK government’s crypto outlook is yet more positive still. The legislation allows for the creation of regulatory sandboxes in UK crypto, which would allow up and coming crypto businesses to test out their products and services under government surveillance and without impacting real-world dealings. This move is intended to inspire crypto innovation in the UK, and bring the nation up to date with the web3 revolution around the world.
Bright Future for UK Crypto
The UK Travel Rule for crypto has brought Great Britain one step closer to becoming a global crypto hub, and the road ahead might bring further changes for the UK to become a part of an international crypto regulatory framework! As for the privacy challenges faced by some traders, further down the path there might be some provisions to allow users to retain their privacy while trading in a regulated environment. For now, however, user safety is paramount, and the compromise on privacy is an integral one.
Note that now is a good time as any to test the UK crypto waters, and try out some trades under precise regulatory surveillance over UK crypto exchanges! Don’t forget to stay tuned to the latest crypto news with Coinbrit as you make your trading strategies!