UK Tightens Grip on Crypto Crime: New AML Rules Signal Broader European Crackdown
Amid the ongoing rise of cryptocurrency visibility and investment at the global scale over the past decade, the Treasury Department of the United Kingdom announced a bold move to curb financial crime within this space, unveiling a draft of stringent anti-money laundering (AML) regulations targeting crypto firms, aligning with a broader wave of regulatory crackdowns sweeping across Europe. Released in early September 2025, the new proposals aim to close various loopholes that have been exploited by illicit actors over recent years for personal gain while also reinforcing the push towards innovation in this rapidly-evolving sector
The UK’s proposed rules, detailed in a consultation paper that will remain open for feedback until September 30, 2025, focus on tightening oversight on the ownership structures and general operations of crypto firms’ while bringing about a risk-based approach to the handling of these entities as a whole. A key change in the proposed measures would see a lowered threshold for the necessary reporting of changes in control within a firm from 25% to just 10%. This modification would then allow federal regulators to scrutinize a wider range of influential stakeholders more effectively, while bringing oversight of crypto firms in line with their counterparts across the greater UK financial system. Further, the new measures would see the Financial Conduct Authority (FCA) – the UK’s top financial watchdog – shift from assessing “beneficial owners” to a broader “fit and proper” test for anyone wielding significant control, addressing complex ownership structures often used to obscure illicit activity. Analysts believe that such a move could help to directly increase transparency, providing greater insight into a controller’s competence, integrity, and risks of financial crime, especially from overseas providers.1 This aligns with findings from the UK’s 2024 National Risk Assessment, which highlighted crypto’s growing role in money laundering, with a reported 12% of UK adults owning crypto assets and law enforcement noting their use in cross-border schemes.
The new proposals also mandate stricter due diligence and background checks on crypto firms’ with respect to their banking relationships, particularly with overseas correspondent banks. They would also ban any ties maintained with shell banks outright, while potentially implementing new rules for trusts linked to crypto firms. This could include an expansion of the types of trusts that are required to register with the nation’s Trust Registration Service to further boost financial transparency. These enhancements respond to Europe’s broader push to sever weak links between crypto and traditional finance, where poorly regulated intermediaries can and have facilitated heavy illicit financial flows over years past. Customer due diligence is another focus, with the UK advocating a risk-based approach to management of this area as well. Aside from the enhanced checks on customers currently required by UK-based crypto firms, if passed, the new measures would also require these entities to prioritize the identification and reporting of potentially ‘high-risk’ transactions, such as those involving significantly large sums of money, complex transactions performed either through or on behalf of varying parties, or those originating from countries flagged by the Financial Action Task Force (FATF). This mirrors efforts taken in other European jurisdictions such as Germany and France whose respective regulators have cracked down on unregistered crypto platforms and pushed for compliance with FATF’s “Travel Rule” for transparent transaction data.
Europe’s regulatory landscape is shifting rapidly from the perspective of financial security for its citizens and financial institutions, though this increase in oversight has done little to deter further investment into the crypto space thus far, which bodes well for future growth and development. Digital asset firms have had to pass money-laundering checks from the UK’s markets watchdog since 2020, and the EU’s Markets in Crypto-Assets (MiCA) framework was expanded in 2024 to set the initial precedent for more harmonized rules between the realms of crypto and traditional finance, requiring crypto firms to register and comply with AML standards governing the UK’s greater financial system. Her Majesty’s Treasury built on this earlier this year, releasing a draft Statutory Instrument which sought to bring crypto-asset activities – such as trading platforms, custody services, stablecoin issuance, staking, dealing and arranging – within the UK regulatory perimeter under the Financial Services and Markets Act (FSMA) 2000. The UK’s latest well-timed proposals will seek to build even further on this momentum, with plans to integrate OECD cryptocurrency reporting standards and update monetary thresholds from euros to pounds for practical compliance.
All told, the UK’s actions reflect a growing European consensus that stronger oversight is essential to address the risks posed by digital assets, as regulators from London to Brussels intensify efforts to safeguard the financial systems of their respective countries, as well as that of Europe as a whole. However, while the latest proposed rules aim to enhance transparency and reduce financial crime, they may pose various challenges for crypto firms, particularly those of the smaller variety. Compliance costs for monitoring systems, KYC processes, and data retention could strain resources and revenue for the firms themselves, which could potentially push some activity out of the UK and into less-regulated jurisdictions. However, stronger regulations may also attract greater institutional investment by boosting market (as well as consumer) trust, as has been seen in both the European and American markets where compliant platforms have gained increased traction over recent years. With the FCA set to oversee all crypto asset service providers by early 2026, the UK is positioning itself as a leader in responsible crypto regulation, echoing Europe’s broader crackdown on financial crime in the digital age and further spurring the growth of the crypto space as a whole moving forward.
Citations
- Mitchell, Eddie. “UK Moves to Rein in Crypto Industry with New ‘fit and Proper’ Rules.”CCN, 5 Sept. 2025.