The United Kingdom authority reportedly revealed its plan to adjust a proposal mandating crypto companies to collect personal data from individuals, holding unhosted wallets as recipients of crypto asset transfers.

Specifically, HM Treasury – as detailed In its modification to the Money Laundering, Terrorist Financing and Transfer of Funds updated on Wene – reportedly revealed its intention of reducing the mandatories employed for gathering data from both the senders and recipients of crypto sent to unhosted wallets, unless the transaction poses “an elevated risk of illicit finance.” 

The U.K. authority further claimed that unhosted wallets are vulnerable for illicit use of a vast array of purposes, nominally as an extra layer of protection, since it is exactly what happened for cold wallets from time to time.

“There is not good evidence that unhosted wallets present a disproportionate risk of being used in illicit finance. Nevertheless, the government is conscious that completely exempting unhosted wallets from the Travel Rule could create an incentive for criminals to use them to evade controls.” the HM Treasury report additionally remarked. 

These modifications from the U.K. authority were carried out as a response to a consultation that took place between July and October last year, with “[Anti-Money Laundering] (AML)/[Counter-Terrorism Financing] (CTF) supervisors, industry, civil society, academia and several government departments”. 

During the session, many shared a mutual worry regarding the “breadth of personal information collected” associated with transfers to unhosted wallets, together with the time needed to enact that kind of policy. 

Per the Treasury Department, the amendments will have a one-year grace period, effective beginning September of next year, should the greenlight is granted by Parliament.

HM Treasury also shared hints for its implementation intent for the adjustments to be carried out in accordance with the Financial Action Task Force’s Travel Rule, which establish suggestions for regulators looking to having cryptocurrency transactions comply with Combating the Financing of Terrorism and Anti-Money Laundering regulations.