UK backtracks on regulation for “unhosted” digital wallets
UK backtracks on regulation for “unhosted” digital wallets
Crypto

UK backtracks on regulation for “unhosted” digital wallets

By Vincenzo Cacioppoli - 21 Jun 2022

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Contrary to the EU, UK has decided not to oblige crypto companies to send information on transactions of so-called “unhosted” digital wallets.

Tracking the activities of “unhosted” digital wallets is not mandatory in the UK

Britain has decided to backtrack on cryptocurrency legislation and will not follow the lead of the European Parliament, which last March passed a directive requiring all crypto companies to mark every transaction from both exchanges and “unhosted” or “cold” wallets.

To clarify, “unhosted” digital wallets are all those wallets that allow users to exercise independent control over their funds, such as MetaMask for example. 

At the time of the approval of the MiCA directive, the crypto sector had strongly contested the part of the rule regulating the type of information that had to be sent to the supervisory authorities, which required precisely the sending of information on all transactions made by digital wallets of an amount greater than €1,000

A document published by the UK Treasury states: 

“Instead of requiring the collection of beneficiary and originator information for all unhosted wallet transfers, crypto asset businesses will only be expected to collect this information for transactions identified as posing an elevated risk of illicit finance”.

The decision came after soliciting feedback from a variety of respondents, including academics and industry experts.

Updates on the directive in the UK

This is a genuine reconsideration, even though at first Britain was never soft on the cryptocurrency world. It is worth remembering that Binance, the world’s largest exchange, was banned from operating on British soil last year.

Now, after listening to a commission of experts consulted by the Treasury, it seems to be convinced that the choice made by Europe is fundamentally wrong

The only exception to the regulation of receiving transaction information, although this applies not only to digital assets, is in the case that there may be a suspicion that the transfer may have illicit origins, linked to the financing of terrorism or money laundering. 

Many of the British government’s advisors, who drew up a lengthy report on the subject, seemed to agree with Brian Armstrong, CEO and founder of Coinbase, who at the time criticized the European law as being anti-privacy and anti-innovation.

According to some, Britain’s decision would also be yet another attempt to break away from European rules, after Brexit, by adopting legislation more favourable to the crypto world than Europe.

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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