Three months ago, the EU Parliament approved a similar measure. Contrary to which was approved by the European Union in March, the United Kingdom will not require crypto asset senders to collect any information about recipients using unhosted wallet addresses.
According to a document, Treasury states that instead of asking for beneficiary and originator information for unhosted wallet transfers all crypto asset businesses will only need to collect it for transactions that are considered to be high-risk of illicit finance. After soliciting feedback from many respondents, including industry experts and academics, the decision was made.
This news may be a relief to the privacy-focused wing in the crypto community that spoke out against the EU’s measures.
Brian Armstrong, Coinbase CEO, referred to it as “anti-innovation,” anti-privacy and anti-law enforcement at the time. He also pointed out the burdensome requirements that were placed on individuals.
According to a Treasury report last week, Armstrong was supported by many U.K. government consultants. Opponents of the reporting requirement claimed that it would be burdensome and not effective in dealing with illicit transactions.
The supporters of the requirement claimed that transactions between any party should be transparent like those between crypto asset companies. This would make “unhosted wallet transaction” transactions more risky. However, the government disagreed and stated that there was “no evidence” that unhosted wallets pose a disproportionate risk.
Unhosted wallets are popular among those who have crypto assets to legitimately store them. They offer security benefits such as customizability and the possibility of storing private keys. The government also mentioned cold wallet storage.
Unhosted wallets, also known as “non-custodial”, are those where the individual user has full control of their private keys and not an exchange or trading platform. This allows users to have full control over their funds without the need for permission from third parties. Examples include MetaMask, WalletConnect and hardware wallets such as Ledger or Trezor.
In February, the Canadian government ran into problems with unhosted wallets. Nearly $1 million worth of Bitcoin was transferred to Freedom Convoy protesters. Despite successful bank account freezes and donations platforms like GoFundMe being implemented, authorities were unable to seize all the unhosted funds.