The Economic Crime and Corporate Transparency Bill empowers authorities to confiscate cryptoassets linked to crime.
UK authorities may soon be able to target and confiscate cryptocurrencies used for illicit purposes.
The bill, known as the Economic Crime and Corporate Transparency Bill, underwent a third, final reading by the House of Lords on July 4 and now awaits the final two stages of the legislative process – a Consideration of Amendments and the Royal Assent.
The bill was first introduced in September 2022 and it aims to strengthen the UK’s general response to financial crime and prevent organised criminals from “abusing the UK’s open economy”.
Cryptoassets fall under the scope of the bill. The latest draft gives authorities greater flexibility to seize cryptocurrencies that are tied to criminal activity, such as terrorism.
The proposed bill imposes legal responsibilities on “UK-connected” crypto service providers. It grants magistrates’ courts the authority to order these providers to “realise” cryptoassets, i.e. convert them into a more manageable form, such as GBP/other assets, and use the proceeds to satisfy a confiscation order. Providers who “fail to comply” will face a fine.
The bill also outlines that once illicit cryptocurrency is seized, officers may “(a) retain the item and deal with it as they see fit, (b) dispose of the item, or (c) destroy the item” within a year if unclaimed.
The bill comes a week after the enactment of the new Financial Services and Markets Bill (FSMB) – a landmark legislation that recognises crypto as a regulated financial activity in the UK.
The FSMB is a broad finance bill that seeks to make huge changes to the UK financial sector in light of Brexit. It enables the regulation of crypto assets and stablecoins in order to facilitate the “safe adoption” of blockchain-based finance in the UK.
The library briefing of the bill outlined its mission to “reduce regulations in order to enable technological innovation” in the UK financial market infrastructure – a huge welcome in light of the ongoing regulatory nightmare in the US.
Regulation brings the UK a step closer to becoming a “global crypto hub”.
The UK government said in April that it intended to make the UK a “global hub” for cryptoasset technology, particularly in light of frosty regulations elsewhere. Economic secretary to the Treasury, Andrew Griffith, commented that 2023 is proving to be “a banner year” for financial reform, unlocking “billions” in investment.
The FSMB is geared primarily toward stablecoin regulation.
The bill defines a “digital settlement asset” as “a digital representation of value or rights, whether or not cryptographically secured, that (a) can be used for the settlement of payment obligations; (b) can be transferred, stored or traded electronically, and (c) uses technology supporting the recording or storage of data (which may include distributed ledger technology)”.
The explanatory notes state that this definition includes stablecoins and other cryptoassets, but it is opposed to “other potentially more volatile cryptoassets”.
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