The UK Treasury has revealed the action plan for anti-money laundering and counter-terrorist finance. The report says that the action plan represents the most significant change to the country’s AML/CTF regime in over a decade.

It pointed out that the HM Treasury launched a Call for Information in 2014 on the benefits and risks associated with digital currencies. The responses received highlighted that while digital currencies and associated technology have the potential to deliver real benefits for businesses and consumers, some features of digital currencies could provide opportunities for illicit use.

“HM Treasury notes this potential risk, while acknowledging that evidence from across government, law enforcement and academia suggests that there is currently a low level of illicit activity in digital currency networks”, it added.

Among other things the Treasury said that it intends to bring digital currency exchange firms into anti-money laundering regulation, as it is currently at the stage where users “cash in” and “cash out” of digital currency networks that money laundering and terrorist finance risk is highest.

“We note that extending the perimeter of anti-money laundering regulations beyond digital currency exchange firms (e.g. to wallet providers) would not deliver any benefits in terms of mitigating money laundering and terrorist finance risk, and would place significant burdens on firms in this innovative and embryonic sector”, it added.

This clearly shows that while the government is taking a firm stand against money laundering or the funding of terrorism through UK institutions, it is watchful not to over-regulate the digital currency and blockchain technology space that could hamper the ongoing innovation.

Last year, the government announced the launch of a new research initiative which will bring together the Research Councils, Alan Turing Institute and Digital Catapult with industry in order to address the research opportunities and challenges for digital currency technology, and will increase research funding in this area by £10 million to support this.