UK authorities do not store user data from non-hosted crypto wallets
However, the UK government has reserved the right to monitor wallet transactions that authorities deem high-risk.
Most customers who use crypto assets for legitimate reasons use the non-hosted wallets for customization purposes.
The UK government has decided not to collect user data from non-hosted crypto wallets. According to the issued guidelines, non-hosted crypto wallets are not reported to the UK Treasury. Consequently, private wallets can conduct transactions without the need for KYC functions.
However, the UK government has reserved the right to monitor wallet transactions deemed high risk:
“Rather than requiring the collection of beneficiary and originator information for all non-hosted wallet transfers, crypto companies are expected to collect this information only for transactions that have been identified as having an increased risk of illicit funding. “
The UK and crypto wallet regulations
The British government does not want to hinder innovation but at the same time protect its citizens from criminals. Also, most crypto assets run on permissionless blockchains that operate extremely fast.
Most customers who use crypto assets for legitimate reasons use the non-hosted wallets for customization purposes:
“Many people who hold crypto assets for legitimate purposes use non-hosted wallets because of their customization and potential security benefits — cold wallet storage.”
Under UK procedural rules, a client has full control over their crypto assets as long as they are using non-hosted wallets. In case the same customer decides to use wallets on crypto exchanges, KYC will definitely be enforced. Binance has come under heavy scrutiny in the past for the same reasons.
The crypto market is developing fast and multi-chain is the focus of most crypto projects. Plus, it’s a sure-fire way to attract more customers in the future. Therefore, the government is very keen not to hinder developments and innovations in the crypto and blockchain industry.
Regulators around the world have been looking for ways to enable crypto innovation in a secure environment over the past few years. The European Union, United Kingdom, United States and Canada, as well as other global economies, are looking for ways to safely regulate the crypto and blockchain industries.
The big picture
The crypto market has shrunk enormously in the last few months . The market cap of all cryptocurrencies has dropped from around $3 trillion to around $955 billion today.
The drop can also be seen in the traditional stock market, although not as sharply as in the crypto space. The UK move to allow unhosted wallets without KYC has been welcomed by the crypto community.
Many states are now vying to attract the most investors into the crypto and blockchain industries on their territory. Bitcoin is already the official currency in El Salvador and the Central African Republic .