Britain to tighten cryptocurrency regulation

The British authorities unveiled a three-year “Economic Crime Plan” that includes measures to strengthen the fight against the use of cryptocurrencies for criminal purposes.

Developed by the Home Office and His Majesty’s Treasury, the document sets out actions to:

• reducing fraud;
• combating money laundering;
• countering kleptocracies;
• reducing opportunities for sanctions evasion.

The authorities noted that most cryptocurrency transactions occur in the legitimate space, but the pseudo-anonymous and cross-border nature of the assets makes them attractive for illicit activity. In 2021, the share of the latter in total transaction value stood at about 1% — £1.24 billion — with a rising trend, according to financial intelligence data.

Authorities say that criminals will increasingly rely on unregulated exchanges and trading platforms for illicit purposes.

“The government will develop ambitious plans to protect consumers and foster economic growth by tightly regulating crypto-asset activities, providing confidence and clarity for both consumers and business,” the Plan says.

These steps are intended to make Britain an attractive destination for cryptocurrencies and related innovations. To this end, authorities plan to work with industry representatives, respond to changes, and apply a phased and proportionate approach to regulation.

In the consumer protection plan, the document provides for measures to improve the chances of recovering digital assets for victims of fraud and other crimes. Officials say that, to this end, it is important to improve on-chain forensics methods and to ensure secure custody of cryptocurrencies.

In December 2022, the Bank of England urged the development of a regulatory framework for the industry ahead of the onset of systemic problems.

In February 2023, the Treasury presented plans for implementing oversight of crypto exchanges.