UK Enforces Travel Rule Demanding Crypto Firms to Meet the Regulatory Requirements

Today, September 1, the UK crypto landscape is expected to take a positive turn following the implementation of the Travel Rule. The enactment of the Travel Rule seeks to ensure that virtual assets service providers (VASPs) share critical information with UK regulators.

UK Implements Travel Rule

The Travel Rule was first formulated by the Financial Conduct Authority (FCA), mandating that financial institutions to share information with the regulators and other players in the finance sector. In the initial rule-making process, the FCA worked closely with the UN Financial Action Task Force (FATF) to ensure the new regulation would be beneficial.

After drafting the rules, the FCA and FATF presented the bill before the UK legislative bodies. In July last year, the UK legislator greenlighted the Travel Rule bill into law. The bill’s approval legally allowed the regulators to enact the new rule into law on September 1.

Overview of Travel Rule Requirements

Under the Travel Rule, the regulators have outlined the measures to counteract money laundering and financial terrorism. Additionally, the Travel Rule has a well-laid procedure to guide the VASP to comply with the new provision.

The VASP engaging in foreign trade must conduct a risk-based assessment to uphold compliance. The assessment plays a crucial role in determining whether it was appropriate to provide crypto service to an individual or entity residing in countries where the Travel Rule does not exist. This new rule will apply to the British seeking to transfer funds overseas.

In the period under review, the FATF requested the UK policymakers to revise the Travel Rule and address the loopholes extensively. The FATF blamed the regulators for failing to implement the Travel Rule within the set timelines.

In a previous survey, the FATF observed that only 29 states out of the 98 met the Travel Rule requirements. A publication on demonstrated that the Travel Rule would be implemented in the US, Germany, Singapore, South Africa, Switzerland, Estonia, and the Netherlands.

Community React to Travel Rule Adoption

News concerning implementing the Travel Rule has created a mix among UK residents. A statement from the head of compliance at XBTO, Aja Heise, argued that implementing the Travel Rule signals an excellent gesture to tackle money laundering activities in the UK.

The executive stated that the effect of the Travel Rule mandates the regulators to provide regulatory clarity on crypto assets. He added that the new rule will give the VASP a clear guideline of what they are expected to do.

However, the executive regretted that implementing the Travel Rule will not push the mainstream adoption of crypto assets. Heise argued that investment in crypto education, funding, and tech development are the critical tools that will drive crypto adoption.

In a separate report, the associate general counsel at Fireblocks, Meiran Shtibel, recalled that to attain the International Travel Rule, the UK regulator was obliged to revise the Money Laundering and Terrorist Financing Regulation Act.

Shtibel stated that from Friday, September 1, the VASPs in the UK will be required to meet the Travel Rule requirements. The official admitted that the implementation of the Travel Rule might subject the regulators to complex compliance roles in matters concerning Sunrise.

In his opinion, Shtibel explained that Sunrise matters arise when one of the entities within the UK engages another company where the Travel Rule is not applicable. The executive underlined that all VASPs in the UK must comply with the Travel Rule requirements even when dealing with businesses or individuals in different jurisdictions.

Shtibel praised the remarkable contribution made by the FCA and the FATF to provide clarity to crypto assets. The executive recalled that despite the ambiguity in the initial draft of the Travel Rule formulated by the FCA; the consultation paper has played a critical role in improving regulatory clarity on digital assets.

Shtibel admitted that the regulators must invest their resources to attain the desired compliance level. In his admission, the executive stated that implementing the Travel Rule will support the mass adoption of crypto assets in the UK.

Elsewhere, the chief marketing officer at Chainalaysis, Ian Andrews, argued that it would be complex to coordinate the transfer of information between VASPs and regulators.

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