The UK government has released a policy paper detailing its plans to increase regulation of cryptocurrencies and combat economic crime.
The policy paper, jointly published by the Treasury and Home Office on March 30, outlines the government’s economic crime plan from 2023 to 2026, which aims to “robustly” regulate crypto to tackle the illicit use of digital assets.
The policy paper states that the UK government will pool “the knowledge and abilities of law enforcement agencies” to review and strengthen how crypto assets involved in legal proceedings may be seized and stored.
It also highlights the government’s ambition to make the UK an attractive destination for cryptoasset innovation, but recognises that effective regulation is necessary to benefit everyone, including consumers and firms.
The UK government expects that criminals will shift their crypto transactions to “less regulated exchanges and services” in other jurisdictions, and the Financial Conduct Authority (FCA) will work with its international counterparts to exchange information related to its response on regulation and supervision of crypto.
The policy paper states that illicit cryptoasset transactions linked to the UK in 2021 likely equated to at least £1.24 billion (~1% of total transaction value), with a realistic possibility they were significantly higher.
To address this, the government plans to coordinate with various agencies to implement the Financial Action Task Force’s travel rule and pass the Economic Crime and Corporate Transparency Bill by the end of the fourth quarter of 2023.
Other goals include improving communications between the FCA and crypto firms in the second quarter of 2024.
However, taxpayers in the UK also face their own reporting obligations. On March 15, the UK Treasury announced that it would amend the self-assessment forms for crypto assets starting for the 2024–25 tax year.
The UK’s move to step up regulation of crypto assets follows a trend seen around the world, with many governments increasing their scrutiny of cryptocurrencies and the potential for their use in illicit activities.
Last year, the Financial Action Task Force issued guidance on how countries should regulate virtual assets and related service providers, and many countries have since implemented stricter regulations.
The UK government’s policy paper is part of its broader efforts to tackle economic crime, including money laundering, fraud, and corruption. The government has committed to investing £63 million in its response to economic crime over the next three years, including £6 million specifically for crypto asset regulation.
UK Crypto Regulation
In summary, the UK government has laid out plans to increase regulation of crypto assets to combat economic crime.
The policy paper outlines various steps the government plans to take, including coordinating with agencies to implement the Financial Action Task Force’s travel rule and passing the Economic Crime and Corporate Transparency Bill. The move follows a trend seen around the world, as governments increase their scrutiny of cryptocurrencies and their potential for use in illicit activities.