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The Treasury abandoned plans to introduce KYC on non-stored wallets in the UK.
Uk changes KYC rules
Government agencies across the globe have been restructuring regulatory regulations as they witnessed dramatic market volatility following the collapse of Terra.
Besides updating money laundering rules, the UK's HM Treasury has decided to reverse plans to impose Know-Your-Customer (KYC) restrictions on non-guardian cryptocurrency wallets, also known as private wallets. Kyc protocols used to collect information from cryptocurrency depositors help track the original source of cryptocurrencies and prevent money laundering and terrorist financing.
The proposed regulatory rules will come into effect in September 2022 if parliament passes them.
The deployment of KYC on non-storage wallets is not necessary
According to a newly published report by HM Treasury, the deployment of KYC on unoccupied wallets seems unnecessary.
The government does not agree that wallet transactions that do not store automatically are considered higher risk. Many people hold crypto assets for legitimate purposes using non-storage wallets due to their customizability and potential security advantages (e.g., storing cold wallets). There is no definitive evidence that non-stored wallets are at disproportionate risk of being used in illegal financing.
Under previous money laundering regulations, the Treasury controlled the transfer of cryptocurrencies in the Financial Action Task Force (FATF). The force requires both senders and recipients to send their information to cryptocurrency exchanges to better track the source of money. Besides, it implies short-term and long-term costs.
As such, it would not be reasonable for legitimate organizations to provide the user's information at the time of transfer each time.
KYC rules relaxed
However, the UK's authority reversed its decision after consulting with key industry figures. It includes government agencies, industry bosses and academics, and others.
Some participants called for that imposing travel rules on everyone would increase costs. Some proposals to deploy proof technology have no knowledge to replace, as it prevents a person from sharing personal information by proving "customer due diligence tests have been performed." Personal wallets become the main agenda while implementing the rules.
When the rules refer to costs, the UK Treasury highlights the overall benefits in the opinion of consultants. Authorities have abandoned plans to collect information about the organization's money transfers or unoccupied wallets that are being used for legitimate purposes. Instead, it only requires cryptocurrency businesses to submit information for "transactions identified as having a high risk of illicit financing."
The rules are being relaxed for Fiat money transfers and cryptocurrencies will no longer be subject to the minimum threshold. In addition, requests for information on non-stored wallets will only be required when necessary based on risk risk.
A non-storage wallet is a major regulatory program.
Unlike the UK, the EU has previously backed regulations affecting unoccupied wallets. This has prompted the cryptocurrency community to voice its criticism of gays. Users have lamented that the move will likely affect privacy.
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