UK Resolves Not to Implement KYC Requirements for Private Crypto Wallets
- Based on the majority of consultants’ opinions, the UK has decided against the EU’s March proposal of imposing KYC on private crypto wallets.
The United Kingdom (UK) has imposed a guideline saying the Treasury will not require know-your-customer (KYC) information from all private crypto wallets. The information will only become necessary when crypto wallets are flagged for possible engagement in illicit activities. An excerpt of the UK Treasury’s statement reads:
“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.”
UK Opposes KYC on All Non-Custodial Crypto Wallets
Just three months ago, the European Union (EU) proposed to have cryptocurrency senders collect information about recipients of those assets, specifically, those receiving cryptocurrencies on unhosted wallets.
Unhosted wallets, also known as private or non-custodial wallets, grant their owners control over their public keys. This means they do not require a third party to access their crypto assets. Examples of such are hot wallets like MetaMask and cold wallets like Ledger.
The EU’s move was meant to enable monitoring of illicit financial activities, including money laundering and terrorist financing.
Before enforcing the law, the UK went on to collect feedback from various consultants, including industry experts and academics. A last week’s report from the Treasury shows that the majority of these respondents disagreed with the proposal. They argued that imposing it would “disproportionately” outbalance its effectiveness in curbing illegal activities.
Meanwhile, supporters of the proposal said all transacting parties ought to maintain transparency. They also argued that unhosted wallets, by nature, were more prone to facilitating illicit activities.
The UK government itself opposed the proposal, citing a lack of evidence of private wallets posing a disproportionate risk. Its statement reads:
“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).”
KYC Said to Be “Cumbersome”
The announcement comes as great news to the crypto community, particularly the privacy-focused cohort. Many in this group came out in March to voice their disagreements and frustrations with the EU’s proposition.
One of them was Coinbase CEO Brian Armstrong, who at the time called the bill “anti-innovation, anti-privacy, and anti-law enforcement.” He also noted how cumbersome it would be.
Canada is another jurisdiction that attempted to enforce a similar law but saw it partially fail. In February, supporters of the Freedom Convoy funded protesters with nearly $1 million worth of Bitcoin (BTC). The Canadian government managed to freeze funds in bank accounts and the donating platform GoFundMe. It, however, did not get hold of funds donated to unhosted crypto wallets owing to their privacy capabilities.