RUSI’s taskforce labels crypto a "material risk" for the UK ahead of its 2027 Financial Action Task Force evaluation. The full statutory regime does not take effect until October 25, 2027, yet assessors visit in June. This timeline creates a critical gap where Britain must demonstrate enforcement capability before its new rules are fully operational. I see this as a significant structural weakness that will dominate the upcoming peer review process.
A First Test with High Stakes
This is the first UK evaluation where FATF considers crypto assets directly. The City of London Police assesses that 66% of investment fraud involves crypto, while the 2025 National Risk Assessment rated money laundering high risk, up from medium in 2020. Members warned that current rules could push the riskiest crypto outside the regulator’s reach and onto law enforcement. Over-the-counter brokers, which the National Crime Agency estimates launder hundreds of millions of dollars annually, sit at the center of this concern. The taskforce doubted the UK would show adequate implementation by the time FATF visits in June, noting that Britain moved more conservatively than Hong Kong, the EU, and Singapore. One member stated that the Metropolitan Police’s £5.5 billion seizure linked to a Chinese professional money launderer was an encouraging sign, but also said the UK had barely scratched the surface of crypto laundering.
Regulatory Gaps and Enforcement Limits
The new regime resembles the EU’s Markets in Crypto-Assets Regulation and focuses on identifiable firms. This approach risks excluding high-risk assets like Tether’s USDT from the FCA’s perimeter. A July 2025 Treasury report flagged the stablecoin as having been "extensively exploited" by Russian-speaking networks. Law enforcement must now trace assets the regulator cannot reach, yet members doubted it has the necessary resources to keep pace. The group praised international cooperation efforts like Operation Destabilise, which targeted street cash conversion into crypto. However, they flagged resourcing for the UK Financial Intelligence Unit as a likely vulnerability. FATF data shows nearly 93% of surveyed jurisdictions have yet to apply standards to qualifying DeFi platforms. The final report is due for agreement at the February 2028 plenary, meaning the UK faces a tight window to prove its systems work in practice rather than just on paper.
