Anonymity is the backend of crypto assets, and this concerns the risk posed by it. The UK has issued a report determining the financial and the economical risk involved in crypto trading and other use of crypto assets. The economic threats are continually evolving impacting the major technology and finding new ways to launder money and trading crypto assets is no exception. Financial Action Task Force (FATF) has laid down the challenges and requested regulatory entities to implement the automated system and backtracking to seize the origin of money laundering.
This paper aims to support financial institutions as they navigate this transitional period. Regulating entities should maintain a risk-based approach to drive more effective ways for risk assessment and risk management. Although, it could be difficult to outline a proper risk structure with crypto assets because of their semi-autonomous nature. Crypto assets are developing at a fast pace and being a prominent tool in defeating KYC verification of a trader and fraud prevention tools. Policymakers in the UK are tailoring financial crime regulation to the risks and business models of crypto-asset firms, trying to strike the right balance between reducing the harms of illicit finance and supporting innovation that benefits consumers and the economy. Regulation and clarity on expectations is only the first step and needs to be supplemented with an effective licensing process and effective supervision.
Given the risk of crypto frauds and investment scams across the globe, the REs are taking precautionary steps to protect the customer's money. REs are issuing guidance on how to manage exposure to unregulated exchanges and unregulated products and services. It is complying that the technology possessed by crypto assets is great for the future and falls under the use cases of payment gateway solution companies and other financial systems. But countries should make efforts in solving financial crime and need to implement a proper regulatory framework. It will help the UK to unlock new potential for the consumer sector and the economic growth of the country.