The UK examines the potential full stack of crypto regulations within the next 12 months. The UK government is aiming to gain the status of the world’s crypto asset hub and has taken a different approach to crypto regulation compared to other countries. Primarily, the UK seeks to establish itself as a destination for crypto innovation and attract companies running businesses in the cryptocurrency sphere.
The UK is moving fast in order to create a clear regulatory framework for crypto activity. Several countries are competing to establish themselves as crypto-friendly destinations, while the United States has taken a stricter stance on cryptocurrencies. The UK now has the ability to control its own legislation and make important decisions on crypto regulation. The UK should move ‘in an agile and proportionate way’ about this, and the proposed new law will focus on key areas such as exchange, custody, and lending activities.
The period for government consultation on the regulations will conclude on April 30. Former UK finance minister and now Prime Minister, Rishi Sunak, expressed his desire last year to position Britain as a leading destination for crypto asset technology. The US SEC and CFTC have been pressing charges against US crypto companies and crypto exchanges.
Private US company Chainalysis is a leading company in collecting and analyzing data used on cryptocurrency blockchains. In its annual report on cryptocurrency-related crime, they point out that illicit cryptocurrency volumes reach all-time highs amid a surge in sanctions and hacking.
‘Overall, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022.’ The company assesses that an equivalent of $20.6B is used for illicit activities.
A big part of that sum comes from the offenses related to the economic sanctions on Russia. This shows that a strict regime of sanctions is efficiently imposed on cryptocurrency exchanges, by the US department of the treasury, and international financial institutions. The report describes methods that are used for money laundering and fund transfers. As a key takeaway, Chainalisys points out that the impact of crypto sanctions depends on the jurisdiction and technical constraints.
Ransomware crypto payments
The report shows a decline in ransomware from 2021. Chainalisys claims that ransomware victims increasingly refuse to pay the ransom money hence pushing the criminals out of this scheme. The report is stating that “meaningful disruptions against ransomware actor groups are driving lower than expected successful extortion attempts” In 2021, the US Office of Foreign Assets Control (OFAC) issued an advisory document about the risk of ‘sanction crimes’ that can rise from ransomware payments. OFAC advises all US companies to report ransomware to the FBI prior to any action. This is also considered to be one of the factors for the drop in ransomware payments. In addition, ransomware lifespan is significantly shorter. From 470 days in 2019, it is down to 70 days in 2022.
Money laundering
The report is stating a rise in money laundering activities from $14.2B in 2021 to $23.8B in 2022. The report is stating ‘underground money laundering services’ are a growing concern. Such groups use private channels on messaging apps to set and organise private transactions that are hard to track.
Cryptocurrency scams
Cryptocurrency scams and the use of cryptocurrency on darknet markets are on the decline compared to previous years.
