UK citizens who receive money in digital wallets on cryptocurrency exchanges can now have their money confiscated if they fail to provide proof of the identity of the sender and the purpose of the payment, after the Financial Conduct Authority (FCA) introduced new rules.
The so-called travel rules, which will come into effect on September 1, 2023, require crypto companies in the UK to "collect, verify and share information on the transfer of crypto assets."
If the incoming payment is from a foreign jurisdiction that does not recognize travel regulations, the UK institution processing the deposit must conduct a "risk-based assessment to determine whether the crypto assets are being provided to the recipient," according to the FCA. ".".
Bottom line: If you can't prove who sent you the money and why, your crypto exchange now has the legal right to confiscate your funds.
Outgoing transfers are also subject to new rules, so users must provide recipient details before being allowed to send money from digital wallets.
"In line with our objectives of consumer protection and competitiveness, the Travel Rule is a way to raise standards in the crypto-asset industry," the FCA said, noting that many would see an odd juxtaposition between consumer safety insurance and discretionary insurance. confiscation - authority over their digital property.
“The travel rules are designed to increase the transparency of cryptocurrency transfers, making it harder for criminals to use crypto assets for illegal activities. In particular, these travel rules advance anti-money laundering (AML) and counter-terrorism financing (CTF) efforts around the world by helping cryptocurrency companies identify suspicious transactions and conduct effective sanctions checks.
Challenger bank Revolut is one of the UK firms to inform its customers of the rule change on Thursday, advising users to provide detailed transaction information "so they can continue to use all our crypto features".
"If you withdraw money to a different cryptographic address than the recipient's name, we will ask for additional information," the company said. It should be noted that if the sender violates the rules on the other hand, customers now face a freeze on incoming payments.
The travel rules began in 1996 as a money control protocol launched by the United States' Financial Crimes Enforcement Network (FinCEN). Initially focused on payments within the discretionary banking system, the system was expanded by the Financial Action Task Force (FATF) in 2019 to include "virtual assets (VA) and VA service providers (VASP)". Last year, the UK government passed legislation introducing these wider powers, giving companies until 1 September 2023 to comply with the new rules.
Other countries that have adopted the regulation are the United States, Germany, Japan, Singapore, Switzerland, Canada, South Africa, the Netherlands and Estonia.
Regardless of what legal or moral justification these jurisdictions provide for implementing the new regulations, the majority of cryptocurrency enthusiasts who use digital currencies as public money outside of the control of governments and banks are unlikely to be swayed.
For worried people, the solution is clear: learning how to own a wallet doesn't mean going to jail. "Not your key," said the old man firmly, "nor your coin."