According to a recently published report by Financial Action Task Force (FATF), cryptocurrency exchanges in the U.K. are ‘low-risk’ when it comes to money laundering and terrorist financing activities.
FATF is a global anti-money laundering policymaker. According to the report, while money laundering is an emerging risk when it comes to the cryptocurrency market, there is not much evidence to suggest that crypto exchanges are responsible for it.
Plan for the crypto sector
The financial regulator has asked the U.K. authorities to make a plan for rules for the crypto sector to prevent money laundering and financing of terrorist activities in order to tackle any potential risks.
The regulator has asked the country to: “Continue to develop an understanding of emerging risks (such as virtual currencies) and intelligence gaps, and take appropriate action.”
EU’s fifth Anti-Money Laundering Directive
The U.K. has acknowledged the request and has stated that there are “inherent vulnerabilities” associated with digital currencies due to their anonymous nature. Consequently, the country is planning to implement EU’s fifth Anti-Money Laundering Directive to regulate cryptocurrency exchanges. The country will also closely watch all the fiat to crypto transactions happening on exchanges.
The report also notes,“Virtual currency exchange providers are not yet covered by AML/CFT requirements. This is an emerging risk and there is not yet evidence to suggest that broad scale ML/TF is occurring in the UK through this relatively small sector.”
FATF plan for global cryptocurrency regulation
FATF is expected to issue a guidance for global cryptocurrency regulation by June next year. The guidance will lay out rules regarding how countries should treat crypto exchanges, initial coin offerings (ICOs) and crypto wallet providers.
The initiative comes after the leaders from the G20 summit who had called for international efforts to lay out rules and regulate the cryptocurrency market.
“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed,” they stated.
