UK Treasury changes course on data collection around non-custodial crypto wallets

The U.K. government has said it intends to amend a proposal that would require crypto companies to collect personal data from individuals who hold noncustodial wallets who are recipients of digital asset transfers.

Updated in Wene, HM Treasury in its amendments to money laundering, terrorism financing and transfer of funds Say It will reduce the requirements for collecting data from senders and receivers Send cryptocurrency to non-custodial wallets, unless the transaction constitutes an “elevated risk of illicit financing”. The UK government added that non-custodial wallets can be used for a variety of legitimate purposes, including as an sometimes extra layer of protection for cold wallets.

“There is no good evidence that non-custodial wallets carry a disproportionate risk of being used for illicit finance,” the HM Treasury report said. “Nevertheless, the government is aware that a complete exemption from the travel rule for non-custodial wallets may incentivize criminals. Use them to evade control.”

According to the UK Government’s agreement between July 2021 and October 2021[Anti-Money Laundering] (Anti-Money Laundering)/[Counter-Terrorism Financing] (CTF) regulators, industry, civil society, academia and several government departments,” many of whom expressed concerns about the “breadth of personal information collected” transferred to non-custodial wallets and the time it would take to develop such policies. According to the Treasury, the amendments will have a one-year grace period and, if approved by parliament, will take effect in September 2023.

related: Enforcement and adoption: What does the UK’s recent regulatory targets for cryptocurrencies mean?

The UK Treasury has hinted at implementing the changes under the Financial Action Task Force’s travel rules, which Make recommendations to regulators Aims to make cryptocurrency transactions compliant with the Anti-Terrorism Financing and Anti-Money Laundering regulations. FATF will publish report On how participating countries will implement travel rules by the end of June.