FATF wants countries to take crypto regulation seriously, says NFTs, DeFi
The Financial action group (FATF) is looking to step up pressure on countries to adopt crypto regulations – and its updated guidelines have mentioned non-fungible tokens (NFTs), decentralized finance (DeFi), peer-to-peer trading ( P2P) and stablecoins for the first time.
The FATF, which advises and monitors governments in the fight against money laundering and the financing of terrorism for G7, the Organisation for Economic Co-operation and Development, and other multinational organizations, released a historic set of guidelines in 2019, including the much-maligned Travel Rule cryptocurrency exchange report protocol. In a document released today, the FATF said it has updated and improved its guidelines to “incorporate and replace the 2019 guidelines”.
And while the body again stressed its commitment to the travel rule and issued a warning, saying it had noted a “lack of implementation of the travel rule by the jurisdictions.” This, he said, “acted like [a] discourage the private sector from investing in travel rules solutions.
He advised companies to take the lead in compliance, writing:
“Regardless of the lack of regulation in the recipient jurisdiction, sending entities may require recipients to comply with travel rules by contract or by business practice. “
In addition, the FATF added details to its definitions of what is a ‘virtual asset’ and a virtual asset service provider (VASP), warning that ‘there should be no instances where an asset relevant financial is not covered by the FATF standards.
Stable coins are given special consideration in the paper, with the body essentially concluding that fiat-pegged tokens are, by definition, either crypto assets or “financial assets.” He concluded that if tokens are considered to be crypto assets, they should be controlled accordingly, and if they are considered to be financial products, they “should be supervised in accordance with this determination in the same way as all other assets. classified in the same way “.
Regarding stablecoin operators, he wrote that “a range of entities involved in stablecoin deals could qualify as VASP.”
Regarding DeFi, the FATF appeared to suggest that many protocols are less “decentralized” than they might claim, explaining:
“It seems fairly common for DeFi agreements to claim to be decentralized when they actually include someone with sufficient control or influence, and jurisdictions should apply the VASP definition regardless of self-description.”
Here are some other key points from the updated guidelines:
- A section on NFTs is included, but seems somewhat preliminary, with the mention that some NFTs may qualify as crypto-assets, but concluded that “countries should […] consider the application of FATF standards to NDTs on a case-by-case basis. “
- DeFi applications themselves are not VASPs, but “creators, owners and operators or others who maintain sufficient control or influence over DeFi agreements” may be – and may need to be. ” obtain operating permits accordingly. (Learn more: DeFi industry is breaking the law – time to act)
- On P2P transactions, the body noted that such transactions can involve crypto-type “risks” and should be monitored. He wrote: “Although the FATF has not observed a distinct trend towards increased use of P2P transactions so far, there remains the potential risk that more virtual asset transactions will move to the P2P space for avoid regulations / supervision as more and more jurisdictions implement FATF standards and regulate and supervise VASPs.
- The FATF does not consider industry self-regulatory bodies to be appropriate agents.
- There is a need for more “sharing and cooperation between” the national “VASP supervisors”.
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