By BlockAI
The UK draft AML rules for crypto firms set out tougher controls on ownership, oversight, and customer checks to curb money laundering and terror-financing risks. Launched by HM Treasury and the FCA, the UK draft AML rules for crypto firms lower the change-in-control notification threshold and broaden regulator powers to spot risky ownership. The proposals aim to plug loopholes exposed by complex ownership structures and to make crypto firms subject to the same rigorous scrutiny other financial services face. With a public consultation open until September 30, 2025, the draft timeline points to final rules reaching Parliament in early 2026. Firms and investors should start preparing now for how the UK draft AML rules for crypto firms will reshape compliance and deal-making.
HM Treasury moves
HM Treasury led the review that produced the UK draft AML rules for crypto firms, citing evidence of significant exposure to financial crime across the sector. The draft asks for the change-in-control threshold to drop from 25% to a 10% stake — called the change-in-control threshold 10% — so regulators see more ownership shifts early. That shift is meant to stop bad actors using layered or offshore holdings to hide influence. HM Treasury also wants clearer AML/CTF guidance tailored to crypto, including converting monetary thresholds into sterling to remove ambiguity for firms that operate across currencies.
FCA fit and proper
The FCA would apply an expanded fit and proper test under the UK draft AML rules for crypto firms, assessing controllers and senior managers against broader integrity and competence checks. The new fit and proper test aims to capture indirect controllers and beneficial owners in complex ownership structures rather than only formal shareholders. The FCA’s stronger gatekeeping powers will include ongoing monitoring and enhanced reporting duties when thresholds are crossed. For acquisitions, the FCA’s view will matter more, making legal and regulatory diligence essential for any investor targeting a crypto firm.
Lowering ownership threshold
Lowering the change-in-control threshold to 10% is a cornerstone of the UK draft AML rules for crypto firms and one of the most concrete steps to increase transparency. A lower threshold means more transactions trigger notification, which helps regulators spot potential layering or sudden concentration of control. Crypto firms should update shareholder registers and investor onboarding policies to reflect the new change-in-control threshold 10% and to speed internal alerts when stakes move. Legal advisers will need to model deal scenarios under the new regime to avoid post-closing regulatory headaches.
Stronger customer checks
Customer due diligence is a major focus of the UK draft AML rules for crypto firms, pushing firms to tighten onboarding, ongoing monitoring, and source-of-funds checks. The proposed standards update AML/CTF guidance for crypto firms and encourage a risk-based regulation approach that scales controls to actual money-laundering risk. Exchanges, custodians, and DeFi gateways will have to show how they verify customers and trace suspicious flows, using a mix of on-chain analytics and traditional KYC. These customer due diligence steps are intended to reduce anonymity abuses without stifling legitimate innovation.
Timeline and consultation
The public consultation on the UK draft AML rules for crypto firms runs through September 30, 2025, and respondents can influence details on thresholds, sterling conversion of thresholds, and supervisory approach. The government expects to present final regulations to Parliament in early 2026, giving firms a measurable runway to adapt systems and controls. Firms that engage early during the public consultation may shape practical aspects of the rules and gain better insight into how the FCA will apply the fit and proper test in real cases.
Risk-based technical changes
Beyond ownership and KYC, the UK draft AML rules for crypto firms propose technical changes like converting monetary thresholds into sterling and updating sector-specific AML/CTF guidance. These tweaks support a consistent, risk-based regulation that aligns crypto with mainstream finance while accounting for on-chain features. The proposals also emphasize cross-border cooperation, given many crypto entities operate across jurisdictions, and call for clearer reporting routes when suspicious activity is detected.
What this means for the market
Taken together, the UK draft AML rules for crypto firms mark a significant tightening of the UK’s approach to crypto oversight. Investors should expect longer diligence timelines, and founders may face new limits on capital structures that obscure control. Compliance teams that move quickly to map ownership chains and upgrade customer due diligence will reduce friction and help firms meet the FCA’s expanded expectations.
Frequently asked questions about UK draft AML rules for crypto firms (FAQ)
Q: What is the main change in the UK draft AML rules for crypto firms?
A: The primary change is lowering the change-in-control notification threshold from 25% to a 10% stake and expanding FCA scrutiny through a broader fit and proper test.
Q: Who is driving these changes?
A: HM Treasury and the FCA are the key bodies behind the UK draft AML rules for crypto firms, with public consultation open until September 30, 2025.
Q: When will the rules take effect?
A: The consultation closes September 30, 2025; final regulations are expected to be presented to Parliament in early 2026.
Q: How will customer checks change?
A: The rules strengthen customer due diligence, requiring more robust onboarding, ongoing monitoring, and source-of-funds checks tailored to crypto risks.
Q: Do thresholds convert to sterling?
A: Yes — the draft suggests converting monetary thresholds into sterling to improve clarity and enforcement across crypto firms.
(Note: This article synthesizes the draft proposals as presented by HM Treasury and the FCA during the consultation process. It does not rely on specific external documents beyond the public proposals under discussion.)
