UK Treasury Report Calls for Less Regulation of Digital Currency Wallet Providers

Britain’s finance ministry has released a new report calling for the exemption of strict KYC/AML requirements on digital currency online wallet providers. The 63-page report, Acting Plain for anti-money laundering and counter-terrorist finance, states that as a result of HM Treasury’s call for information on digital currencies in 2014, officials concluded that usage of virtual currencies in illegal activities was quite low.

The report states:

“Responses also highlighted that some features of digital currencies could provide opportunities for illicit use. HM Treasury notes this 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.”

Citing these findings, the report states that requiring online wallet services to abide by strict KYC rules will not have any impact on illicit activities, but instead would only serve to stifle innovation.

While the report clears online wallet providers, the HM Treasury says that the highest risk for money laundering remains with digital currency exchanges:

“We intend to bring digital currency exchange firms into anti-money laundering regulation, as it is at the point where users “cash in” and “cash out” of digital currency networks that money laundering and terrorist finance risk is highest.”

To better protect the financial system, the report calls for improvements in cross-sector information reporting procedures between governments, financial institutions and the fintech space, “Suggested solutions included better information sharing on trends and typologies including new forms of transactions such as online banking and virtual currencies.” the report says.

 

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