The UK Treasury has dropped plans of introducing know-your-customers (KYC) on unhosted or private wallets. The Treasury has thus abandoned plans to ask all senders of crypto funds for providing information that identifies the recipients in those transactions.
The UK Treasury stated that the government did not accede to the view that unhosted wallet transactions must automatically be viewed as higher risk.
The report further read, “Many persons who hold crypto assets for legitimate purposes use unhosted wallets due to their customizability and potential security advantages (e.g. cold wallet storage), and there is no good evidence that unhosted wallets present a disproportionate risk of being used in illicit finance.”
The decision was made after the policymakers discussed several subjects like revising money laundering laws with regulators, industry players, academics, and government agencies.
It is worth mentioning that many people in the industry viewed the proposed rule as ‘impracticable’ and ‘burdensome’ because it called for financial institutions and crypto exchanges to gather and maintain data on foreign payments.
The UK Treasury has accepted that executing the travel regulation will cost the industry some money. However, the treasury also insists that it will provide overall benefits too.
Moreover, the regulation will ease the rule such that cash and crypto will no longer be necessary to calculate the de minimis level, and only information on unhosted wallets will be needed on a risk-sensitive basis.
In April, a similar ‘privacy-busting’ stance came into the spotlight when the European Parliament decided to pass steps to outlaw anonymous crypto transactions. But, the main concern in all of this is the extent of impact these rules will have on the decentralized finance (DeFi) market.