Question to the HM Treasury:

To ask Her Majesty's Government what steps they are taking to monitor fiat currency to cryptocurrency (1) deposits, and (2) withdrawals, to prevent cryptocurrencies from being used to (a) launder money, and (b) hide transactions in illicit markets.

Since 10 January 2020, UK cryptoasset exchange providers and custodian wallet providers have been in scope of the UK’s Money Laundering and Terrorist Financing Regulations (MLRs) and Part 7 of the Proceeds of Crime Act 2002. This means that firms in the UK which exchange cryptoassets for fiat currency and vice versa are required to register with the UK’s Financial Conduct Authority (FCA), carry out appropriate checks on their customers, and monitor for and report suspicious activity. These can be analysed by the UK Financial Intelligence Unit and made available to law enforcement agencies to investigate and take action when appropriate.

The government has proposed to further extend the requirements placed on cryptoasset firms under the MLRs. HM Treasury recently consulted on the implementation of Recommendation 16 of the Financial Action Task Force (FATF) for transfers of cryptoassets.

Pending the outcome of the consultation, the implementation of this Recommendation would extend the information sharing and record keeping requirements that apply to bank transfers to transfers of cryptoassets, and thereby further assist in the prevention and detection of money laundering.