The United Kingdom Treasury has recently released a consultation paper outlining proposed changes to money laundering regulations, with a particular focus on regulating crypto assets. These proposed changes stem from a thorough review of the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) conducted in 2022. The main objective of these changes is to introduce “smarter regulation” to reduce regulatory burdens, promote the longevity of regulations, and establish a regulatory environment that prioritizes accountability and responsiveness.

One key aspect of the proposed changes is the enhancement of the supervisory and registration framework for crypto firms. The consultation paper emphasizes the need for a robust supervisory regime to improve the effectiveness of the MLRs. Currently, the Financial Conduct Authority (FCA) oversees institutions under both the MLRs and the Financial Services and Markets Act 2000 (FSMA). The paper suggests that institutions regulated under the MLRs would no longer need separate MLRs authorization but would still require FCA regulation, streamlining the regulatory oversight of crypto asset service providers.

The proposed regulatory amendments also aim to broaden the FSMA’s scope to include new activities related to crypto assets, such as operating crypto asset exchanges and custody services. This expansion would require crypto assets that were previously not under FCA oversight to register with the FCA for MLRs supervision.

A key focus of the consultation paper is addressing the existing differences in control assessments under MLRs and FSMA, particularly regarding control eligibility and thresholds. The paper explores the possibility of aligning MLRs requirements more closely with those of FSMA to establish uniform regulatory standards and control mechanisms across the financial industry.

In addition to these proposed changes, the UK has also been exploring the integration of the Organization for Economic Co-operation and Development’s (OECD) cryptocurrency reporting standards into its legal and financial framework. This integration is expected to significantly increase revenue, with projections of £35 million ($45 million) in the fiscal period between 2026 and 2027, rising to £95 million between 2027 and 2028.

The implementation of the OECD framework aims to enhance existing guidelines on offshore accounts, enabling more efficient cross-jurisdictional sharing of cryptocurrency transaction data. This initiative is part of a broader effort to address tax transparency issues arising from the rapid growth of fintech and the global crypto asset market. By aligning with international standards, the UK aims to strengthen its financial system against the challenges posed by technological advancements, ensuring a robust and fair tax collection mechanism.

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