UK Treasury seeks to improve anti-money laundering rules with cryptocurrency regulatory reform

According to the consultation paper issued by the UK Treasury on changes to anti-money laundering regulations, proposed changes will affect the regulation of cryptocurrency assets in various ways. It is reported that the proposed changes stem from a review of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) in 2022. The suggested changes in the document now seek "smarter regulation": "This includes minimizing regulatory burdens and future-oriented regulation, making regulation a last resort rather than a first choice, and ensuring the good operation of a responsive and responsible regulatory system." The document adds that "the regulation only works with the support of a strong regulatory system." Therefore, it details several ways to change the regulation of cryptocurrency asset service providers. According to regulations passed in 2017, the FCA supervises institutions under these regulations and the Financial Services and markets Act 2000 (FSMA). Institutions regulated by FSMA do not need to register for MLRs, but most cryptocurrency companies are not regulated by the FCA and are therefore subject to MLRs regulation. According to proposals in the consultation paper, institutions subject to MLRs regulation will need to be supervised by the FCA but will no longer need to seek authorization from MLRs. Under the current FSMA system, if cryptocurrency assets are "base assets or property for regulated activities or financial instruments, such as in collective investment schemes," they are subject to FCA control. The scope of FSMA will be extended to new activities, such as operating cryptocurrency exchanges and custody. Cryptocurrency assets not regulated by the FCA must now register with the FCA and be subject to MLRs regulation. (Cointelegraph)