New UK law allows crypto exchanges to seize customer funds
Date: 2023-09-01 Author: Karina Ziganova Categories: CRYPTO PAYMENTS, IN WORLD
As of 1 September 2023, crypto users in the UK are entering a new era of regulatory scrutiny. The UK Financial Conduct Authority (FCA) has introduced a "Travel Rule", according to which cryptocurrency exchanges have the right to freeze or withdraw funds from clients if they cannot sufficiently confirm the source of their origin.
It is about the fundamental issue of balancing individual freedom and collective security in the digital age.
UK Crypto Exchanges Fight Travel Rule
The new rule obliges British crypto exchanges to collect, verify and transmit information about the movement of crypto assets.
While the FCA is touting the rule as a tool to protect consumers and increase the competitiveness of cryptocurrencies in the UK, critics warn that it paves the way for crypto exchanges to confiscate digital assets under the guise of law.
According to the FCA,
“In line with our consumer protection and competitiveness goals, the Travel Rule is one way to raise standards in the crypto asset sector.”
It is noteworthy that the UK is not alone in this endeavor. Many countries, including the US, Germany, Japan and Singapore, have introduced similar rules.
However, this initiative also has potential dangerous consequences. It also opens the possibility of freezing incoming payments in the event that countries of origin fail to comply with similar rules. This point still remains unstated, and this omission may soon become a point of contention among users.
Critics call it abuse of power
Critics argue that the Travel Rule violates the fundamental ethics of digital currencies – financial autonomy free from government oversight.
The FCA and its international counterparts argue that these rules are necessary to implement anti-money laundering and anti-terrorist financing initiatives. However, many representatives of the cryptocurrency community consider them to be contrary to the essence of digital currencies.
The most direct route for those who are concerned about this is to go to non-custodial wallets. True to the adage, “Not your keys, not your coins,” self-custody allows users to maintain full control over their assets.
As the crypto market becomes more and more fused with traditional finance, the attention of regulators to it will only increase. While the Travel Rule and similar regulations can keep the sector safe from financial wrongdoing, they also pose significant challenges for law-abiding citizens.
