The UK Treasury has said that it wont seek to impose anti money laundering rules on digital currency wallet providers in a bid to avoid overbuilding those services.
Remarks were issued last week in a report that detailed the UK governments pans to tackle money laundering and terrorist financing risks more broadly. According to the report, the UK Treasury has plans to bring digital currency exchange firms into anti money laundering regulation, reinforcing plans first announced last year.
An outstanding question at that time related to whether these rules would extend to wallet services that do not offer fiat to digital exchange functionality. According to the new report, these companies will not have to face those kinds of requirements.
“ This is consistent with a risk based approach, and we note that extending the perimeter of anti money laundering regulations beyond digital currency exchange firms would not deliver any benefits in terms of mitigating money laundering and terrorist finance risk, and would place significant burdens on firms in this innovative and embryonic sector,” a spokesperson for the UK Treasury stated.
Simply put, the government appears to be taking the position that AML rules wont be levied on other firms working in the digital currency space beyond wallet services, as well. The report goes on to note that, following a review of feedback from law enforcement, academic and government sources, evidence points to a low level of illicit activity in digital currency networks, a possible factor in the regulatory approach outlined.
The government said in the report that it will also encourage information sharing among agencies, a process that would include exchanging data on new forms of transactions such as online banking and virtual currencies. According to the report, the government plans to overhaul its approach to anti money laundering oversight over the next two years.
Last year, the government announced the launch of a new research initiative which will bring together the Research Councils, Alan Turing Institute and Digital Catapult with industry in order to address the research opportunities and challenges for digital currency technology, and will increase research funding in this area by £10 million to support this.
The report also pointed out that the HM Treasury launched a Call for Information in 2014 on the benefits and risks associated with digital currencies. The responses received highlighted that while digital currencies and associated technology have the potential to deliver real benefits for businesses and consumers, some of the digital currencies could provide opportunities for illicit use.
“The Treasury notes the potential risk, while acknowledging that evidence from across government, law enforcement and academia suggests that there is currently a low level of illicit activity in digital currency networks,” the report added.
Among other things the Treasury said that it intends to bring digital currency exchange firms into anti money laundering regulation, as it is currently at the stage where users cash in and cash out of digital currency networks that money laundering and terrorist finance risk the highest.