In a significant development for the cryptocurrency industry in the United Kingdom, crypto asset businesses have started implementing the new Travel Rule, effective September 1. The Financial Conduct Authority (FCA) introduced these regulations on August 17, requiring Virtual Asset Service Providers (VASPs) based in the UK to comply with stringent information-sharing requirements for crypto-asset transfers.
The Travel Rule is designed to bring greater transparency to cryptoasset transfers, making it harder for criminals to use #crypto for illegal activity.https://t.co/kmB6rgMn5e
— Financial Conduct Authority (@TheFCA) August 17, 2023
The Travel Rule mandates that UK-based VASPs must “collect, verify, and share information” regarding crypto-asset transfers. If a payment is received from an overseas source that does not have the Travel Rule in place, VASPs must conduct a “risk-based assessment” to determine whether to release the crypto assets to the beneficiary.
The Travel Rule, originally devised by the United Nations agency Financial Action Task Force (FATF) in June 2019, became legally binding in the UK in July 2022. Its primary objective is to enforce Anti-Money Laundering and Counter-Terrorist Financing rules for on-chain activities. The UK joins a list of nations, including the United States, Germany, Japan, Singapore, Switzerland, Canada, South Africa, the Netherlands, and Estonia, in adopting the Travel Rule, as reported by Sygna.io.
However, despite the global push for compliance, the FATF expressed concerns in June 2023 regarding the rule’s implementation. According to a survey conducted earlier that year, more than half of its member states still needed to take action to enforce the Travel Rule. A FATF survey in March 2022 found that only 29 out of 98 jurisdictions had met the requirements for Travel Rule compliance, and enforcement had begun in only a small subset of these jurisdictions.
Ian Andrews, CMO of blockchain forensics platform Chanalysis, emphasized in April 2022 that facilitating the exchange of information between VASPs across borders remains a challenging issue, especially during the initial stages of implementation. The crypto industry is now closely watching how these regulations impact the UK’s crypto landscape and its global counterparts’ ongoing efforts to address similar challenges.
