UK Implements Travel Rule: A New Regulation Tightening Cryptocurrency Transfers

Dive into the intricacies of the UK's newest cryptocurrency regulation – the Travel Rule.

Understand its impact on virtual currency transfers and how it fits into the broader global context.

Cryptocurrency Regulation in the UK: An Overview

From September 1st, cryptocurrency-related businesses in the UK gained the capability to temporarily hold certain virtual currency transfers.

This comes as a result of the newly implemented "Travel Rule" announced by the Financial Conduct Authority (FCA) on August 17th.

Virtual Asset Service Providers (VASP) based in the UK are now mandated to "collect, verify, and share" information related to cryptocurrency transfers.

Implications for VASPs and Users

If deposits come to a VASP from jurisdictions that haven't adopted the Travel Rule, the VASP must undergo a "risk-based assessment" to decide whether or not to provide the cryptocurrency to the recipient.

Similarly, this rule applies to UK residents transferring funds abroad. Originating from the inter-governmental body, the Financial Action Task Force (FATF) in June 2019, the UK established a law in July 2022 to enforce the Travel Rule.

The primary objective of this rule is to counteract money laundering (AML) and counter terrorist financing (CTF) activities on the blockchain.

Global Adoption of the Travel Rule

According to Sygna.io, other countries that have adopted the Travel Rule include the USA, Germany, Japan, Singapore, Switzerland, Canada, South Africa, Netherlands, and Estonia.

As of March 2022, FATF research indicated that only 29 out of 98 jurisdictions met the requirements of the Travel Rule, with some beginning to enforce it.

Ian Andrews, Chief Marketing Officer at the blockchain forensics platform Chainalysis, expressed in April 2022 that coordinating information exchanges between VASPs is a "considerably challenging issue."