In June 2022, the UK Treasury announced in the report Response to the Consultation that its proposed rule that would have required all senders of funds to private crypto wallets to collect identification details of recipients will not be implemented.
In July 2021, the UK Treasury proposed in a Consultation document, that the originator and beneficiary of funds need to be identified, in accordance with the Financial Action Task Force (FATF) standards to prevent money laundering and terrorist financing. The rule would have foreseen that the sender of any transaction between unhosted, or private, wallets has to collect know-your-customer data from the beneficiary. The document states: “Cryptoasset firms will need to put in place systems for ensuring that personal information of the originator and beneficiary of a cryptoasset transfer is transmitted and received alongside the transfer, in an appropriate format”.
Following the responses to the consultation, the UK Government decided that to create a data collection rule for unhosted wallets is not something that makes sense. The backlash came due to concerns about whether it would even be possible, for example for smart contracts, to comply with this rule as well as whether the data would be safe if individuals have to store it.
However, the UK Government still wants to apply some form of compliance with the FATF’s travel rule, which requires some amount of data collection to prevent money laundering. The document points out: “Instead of requiring the collection of beneficiary and originator information for all unhosted wallet transfers, cryptoasset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance”.
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