UK Govt has no current plans for deposit protections for consumers holding digital currencies

Stephen Barclay, Economic Secretary to the UK Treasury, continues to face an increasing volume of questions with regard to the possible regulation of cryptocurrencies in the UK. The latest questions on this topic concern any protections to be provided to those holding deposits in digital currencies.

In a written answer to a question from Chris Evans, Labour MP, Stephen Barclay explained that:

“The Government has no current plans to introduce deposit guarantee protections for consumers holding digital currencies, but keeps all policy under review”.

He also said that the UK Government does not have any holdings of digital currencies.

Stephen Barclay also commented on a question whether under the Fourth Money Laundering Directive there are minimum transaction thresholds below which customer due diligence is not required for trade and investment in digital currencies.

He said that the European Union’s Fourth Anti Money Laundering Directive was implemented into UK legislation by ‘The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’, which came in to force in June 2017. Digital currency exchanges are not regulated for the purposes of this Directive, so there is no requirement to undertake Customer Due Diligence for trade and investment in digital currencies at present.

The UK Government has, however, committed to bringing digital currencies into the scope of anti-money laundering and counter terrorist financing (AML/CTF) regulation. Provisional political agreement has recently been reached at EU-level to amend the Fourth Anti Money Laundering Directive to bring digital currency exchange platforms and custodian wallet providers into the AML/CTF regime.

These amendments will require Member States to oblige these entities to conduct customer due diligence when establishing a business relationship, when carrying out occasional transactions of €15,000 or more, when carrying out a transfer of funds exceeding €1,000, where there is a suspicion of money laundering or terrorist financing, and when there are doubts about the veracity or adequacy of previously obtained customer identification data, Stephen Barclay noted.

The latest comments were made shortly after HM Treasury had to respond to enquiries about the consequences for the UK economy in case Bitcoin and its likes fail. Stephen Barclay has explained that “The independent Financial Policy Committee (FPC), established by the Government, aims to ensure the UK financial system is resilient to, and prepared for, the wide range of risks it could face — so that the system could support the real economy, even in difficult conditions”.