The UK Treasury has backtracked on proposals to require all bitcoin cash senders to collect information that identifies the funds’ recipients. Creating a know your customer (KYC) data collection rule for unhosted, or private, wallets, according to the Treasury, makes little sense.
The UK Treasury stated in the report: “The government does not agree that unhosted wallet transactions should automatically be viewed as higher risk; many persons who hold crypto assets for legitimate purposes use unhosted wallets due to their customizability and potential security advantages (e.g. cold wallet storage), and there is no good evidence that unhosted wallets present a disproportionate risk of being used in illicit finance.”
UK Treasury are made in consultation with key stakeholders
Following conversations with regulators, industry players, academics, and government agencies on the idea of updating money laundering legislation, the decision was made. Because it required financial institutions and crypto exchanges to gather and store information on overseas payments, many in the industry saw the proposed rule as impractical and cumbersome.
The UK Treasury has admitted that implementing the travel regulation will cost businesses money, but maintains that it will provide overall benefits. It is, however, easing the rule such that no cash or crypto transfers are required to calculate the de minimis amount, and information on unhosted wallets is only required on a risk-sensitive basis.
Unhosted Wallets are being scrutinized by regulators
The UK isn’t the only country with an interest in unhosted wallets. Several international regulators have issued statements on the subject, suggesting that some form of regulation will be necessary. The European Parliament has passed an amendment that could affect unhosted wallets. The crypto community slammed the move, stating it would have a huge impact on privacy.
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