The Financial Action Task Force (FATF) Anti-Money Laundering and Counter-Terrorist Financing Rules known as the ‘travel rule” mandates that crypto operators need to identify the sender and recipient of funds transfers, in order to safeguard against the use of crypto for criminal activities. 

The standards were set for the travel rule’s use in crypto by the FATF in 2019 and starting on 1 September this year, crypto asset businesses in the UK will be required to comply with them.

In response, the Financial Conduct Authority (FCA) released guidance on the approach crypto asset businesses should follow. 

One of the key aspects of the FCA guidance is reinforcing that transfers to countries not yet adhering to the travel rule do not need need to be completely halted. Firms are instead advised to conduct a risk-based assessment before making the assets available to the beneficiary. 

This measure was deemed necessary since the FATF’s 2023 Survey found that more than half of the 151 responding jurisdictions have not taken any steps towards implementing the travel rule, and 75% of international jurisdictions are only partially or not compliant with the FATF’s requirements.

The UK government is aspiring to establish itself as a global crypto asset hub, however some industry players are calling the regulations overly stringent, making it harder for the UK to reach its goal. 

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Earlier this year, Binance – the largest global crypto exchange – halted withdrawals and deposits in GBP due to FCA pressure. Just earlier this week, one of the largest payment processing platforms, PayPal, halted Crypto buying in the UK until 2024 in an attempt to meet new FCA regulations. 

Overshadowing that, perhaps, is the fact nearly £19 billion worth of crypto was sent from illicit addresses last year, a 68% gain from the year before, according to Chainalysis.

The FCA maintains that strict measures are what “help us better protect people, the integrity of our markets and support the sustained competitiveness of the crypto-asset sector in the UK,” according to a release, showcasing the difficulty of striking a balance between innovation and safeguarding against financial crime.