Crypto exchanges operating in the UK will encounter heightened reporting requirements regarding sanctions breaches following new regulations implemented in response to Russia’s war in Ukraine.
The UK Treasury’s Office of Financial Sanctions Implementation (OFSI) has revised its guidance to include crypto exchanges amid concerns that cryptocurrencies like Bitcoin may be used to evade sanctions. Companies are now required to report any violations of these rules immediately and freeze the assets involved; failure to do so could result in financial penalties or criminal charges.
Following Russia’s invasion of Ukraine, sweeping sanctions were enacted globally in late February and early March. While banks and financial institutions have long adhered to stringent sanctions requirements, service providers in the crypto market have not always been subject to the same level of scrutiny.
The OFSI’s actions align with guidance from the UK’s Financial Conduct Authority (FCA) issued in March, which clarified that crypto exchanges are not exempt from sanctions obligations. The FCA stated, “Financial sanctions regulations do not differentiate between cryptoassets and other forms of assets,” and emphasized that using cryptoassets to circumvent economic sanctions constitutes a criminal offense under the Money Laundering Regulations 2017 and associated legislation.
These changes impose additional reporting and regulatory responsibilities on crypto exchanges during a period when many are grappling with legal and financial challenges. For instance, companies such as BitPanda, Gemini, and BlockFi have announced job cuts in recent months, while Coinbase faces a potential class action lawsuit in the US related to customer losses. Additionally, Crypto.com recently withdrew from a substantial £428 million sponsorship deal with the UEFA Champions League, citing concerns about the increasing regulatory landscape for cryptocurrencies.