Had it been implemented as proposed, the rule would have required the sender of any transaction between unhosted wallets to collect know-your-customer data from the receiver. A similar proposal in the U.S. received backlash due to concerns about whether it would even be possible for some entities, like smart contracts with their own wallets, to comply, as well as whether the data would be safe if any random individual had to store it.
UK Government Backtracks on Unhosted Wallet Data Collection Proposal
