UK Proposes Stricter AML Rules for Crypto Firms
The UK’s Financial Conduct Authority and HM Treasury have published draft anti-money laundering (AML) rules targeting crypto firms, aligning domestic requirements with FATF standards. Under the proposals, exchanges, custody services and token issuers must enhance customer due diligence, collect detailed transaction data and implement robust risk assessments and monitoring systems. Suspicious activity reporting and account-freezing protocols will become mandatory. The 12-week consultation period opens this month, with the rules expected to take effect in Q4 2024. While compliance costs and operational complexity will rise, regulators aim to curb illicit finance without stifling innovation. Industry bodies welcome the clarity but warn that smaller firms may face significant onboarding challenges.
Neutral
The draft AML rules bring much-needed regulatory clarity and align the UK with global FATF standards, which may boost institutional confidence in the long term. However, increased compliance costs and technical requirements could strain smaller exchanges and service providers in the short term. Similar measures in the EU’s Fifth AML Directive had a neutral market effect—improving transparency without triggering major sell-offs or rallies. Overall, the balance between higher operational burdens and enhanced legitimacy suggests a neutral impact on crypto trading activity.