The United Kingdom Treasury has released a consultation paper detailing proposed changes to money laundering regulations, with significant implications for the regulation of crypto assets.
These amendments are motivated by the outcomes of a comprehensive review of the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) conducted in 2022. The initiative targets the implementation of “smarter regulation,” aiming to lessen regulatory burdens, ensure the longevity of regulations, and promote a regulatory environment where accountability and responsiveness are paramount.
Central to these proposed changes is the refinement of the supervisory and registration framework for crypto firms. The consultation paper emphasizes the necessity of a robust supervisory regime to bolster the effectiveness of the MLRs. Under the existing regulations established in 2017, the Financial Conduct Authority (FCA) oversees institutions under both the MLRs and the Financial Services and Markets Act 2000 (FSMA).
Notably, the paper proposes that while institutions regulated under the MLRs would require FCA regulation, they would no longer need to seek MLRs authorization. With this simplification, the treasury aims to streamline the regulatory oversight of crypto asset service providers.
The paper articulates a shift in the regulatory landscape for crypto assets. Currently, crypto assets fall under FCA jurisdiction when used as the underlying asset for regulated activities or financial instruments. The proposed regulatory amendments would broaden the FSMA’s purview to encapsulate new activities, including the operation of crypto asset exchanges and custody services. Consequently, crypto assets not previously under FCA oversight will be mandated to register with the FCA for MLRs supervision.
A major point of discussion in the consultation paper is the existing disparity between assessments conducted under MLRs and FSMA, specifically concerning the eligibility for control and control thresholds. The paper deliberates on the feasibility of maintaining two distinct standards of control or aligning MLRs requirements more closely with those of FSMA. Such an alignment would aim to unify the regulatory standards and control mechanisms across the financial industry.
As previously reported by Crypto.news, the United Kingdom also launched a consultation paper to explore the integration of the Organization for Economic Co-operation and Development’s (OECD) cryptocurrency reporting standards into its legal and financial framework. The UK Treasury projects that this integration will significantly boost revenue, with an anticipated increase of £35 million ($45 million) in the fiscal period between 2026 and 2027, escalating to £95 million between 2027 and 2028.
The implementation of the OECD framework aims to augment the existing guidelines on offshore accounts, facilitating more efficient cross-jurisdictional sharing of cryptocurrency transaction data. This move is part of a broader effort to close the gaps in tax transparency caused by the rapid evolution of fintech and the expanding global crypto asset market. By aligning with international standards, the UK endeavors to fortify its financial system against the challenges posed by these technological advancements, ensuring a robust and equitable tax collection mechanism.