A Balanced Approach to AML and Innovation
BPUK fully supports the UK’s commitment to robust anti–money laundering (AML) and counter-terrorist financing (CTF) standards. However, as we note in our response, regulation must remain proportionate, risk-based, and clearly scoped to avoid stifling legitimate businesses and innovation.
We emphasise four key principles:
Proportionate and evidence-based: Target AML efforts where real risks exist.
Clear scope: Exclude open-source developers, miners, and non-custodial wallet providers who cannot perform AML functions.
Respect for privacy and safety: Avoid linking personal data with Bitcoin addresses, which could expose individuals to risk.
Support for UK competitiveness: Ensure that regulatory clarity encourages investment, rather than driving it offshore.
Key Recommendations
Clarify the definition of “cryptoasset business.”
The scope should cover only exchanges and custodial wallet providers, explicitly excluding non-custodial wallet developers and network participants such as node operators and miners.
Limit counterparty due diligence to hosted services.
Requirements for customer due diligence should apply only to interactions between regulated providers, not to self-hosted wallets, which cannot comply as a matter of design.
Protect privacy in information sharing.
Bitcoin’s transparency requires careful handling of data.
Personally identifiable information should never be unnecessarily linked to wallet addresses or shared across multiple authorities without strong safeguards.
Clarify registration and control rules.
“Fit and proper” tests and change-in-control requirements should apply only to businesses offering custodial or intermediary services, not to developers or users of open-source tools.
Set realistic thresholds.
Proposed low-value thresholds for due diligence and reporting should be adjusted to avoid burdening small, low-risk transactions and reviewed regularly to remain proportionate.
Our Position
Bitcoin represents a transformative technology with the potential to enhance financial inclusion, transparency, and economic resilience. The UK has a historic opportunity to lead, but only if regulation is clear, fair, and supportive of innovation.
We call on HM Treasury, the FCA, and other stakeholders to work closely with industry experts to develop a balanced, evidence-based framework that protects consumers without undermining growth.
We also urge policymakers to follow the examples set by the EU’s MiCA and AML frameworks, which explicitly protect non-custodial innovation.
We believe this approach will strengthen the UK’s reputation as a forward-thinking, tech-positive jurisdiction.
Bitcoin Policy UK stands ready to assist regulators and lawmakers with technical insight, industry engagement, and constructive dialogue to ensure the UK achieves this balance.
See our full response here:
https://img1.wsimg.com/blobby/go/aea8e937-fd18-400f-afd9-c3513112c757/downloads/d9b5d6c9-e147-4695-b3ce-0bf78235909f/test.pdf
