November 09, 2021
What FATF’s Latest Guidance Means for DeFi, Stablecoins and Self-Hosted Wallets
The Financial Action Task Force (FATF)’s long-awaited update to its guidance on virtual assets lays out a comprehensive set of guidelines to regulate the quickly evolving cryptocurrency space. With this update released, digital assets firms in the coming years are likely to encounter more clarity on anti-money-laundering and combatting the financing of terrorism (AML/CFT) regulations around the globe, even if some jurisdictions do opt for more restrictive policies than others.
The intergovernmental body’s updated guidance should not surprise anyone who has been tracking regulator discussion on crypto illicit finance, but it does address topics that have faced great regulatory uncertainty, such as decentralized finance (DeFi), stablecoins and “travel rule” compliance.
CBDCs will likely be regulated as fiat currencies and including them under the guidance for permissionless virtual assets may complicate matters.
What it offers is not one way of dealing with these issues, but it unpacks and defines the risks that jurisdictions must address, often providing a diversity of approaches to keep emerging digital asset developments within a solid regulatory perimeter.
Here are some key takeaways for regulators, along with practical implications for the digital asset industry.
DeFi usually isn’t decentralized—FATF warns regulators to not blindly accept the crypto industry marketing that loosely calls various platforms “decentralized.” In function, these platforms typically have a natural, if not legal, person somewhere who controls or influences their activities. The term “controls or influences” is key and offers a framework to analyze who should be the entity obliged to follow AML/CFT regulations. In FATF’s view, almost all DeFi platforms are still Virtual Asset Service Providers (VASP). FATF offers a broad playbook for bringing DeFi platforms under regulatory oversight, including one suggestion that if a DeFi platform truly has no entity running it, a jurisdiction could order that a VASP be put in place as its obliged entity.
Read the full article from Coindesk.
More from CNAS
-
Red Lines and Supply Chains: Trump’s Approach to Trade and Security
Video
The Trump administration is increasingly linking trade policy to national security. Join Emily Kilcrease, senior fellow and director of the Energy, Economics, and Security Pro...
By Emily Kilcrease
-
Ziemba: Struck By Energy Deal Between India & Saudi Arabia
Video
Saudi Arabia and India have agreed to deepen energy ties and cooperate more closely on tourism and technology as the countries seek to strengthen relations at a time of turbul...
By Rachel Ziemba
-
What is President Trump’s Economic Plan?
Podcast
Global financial markets plunged as investors braced themselves for a shock to the flow of international trade. Faced with prolonged market turmoil, within days the US Preside...
By Emily Kilcrease
-
Bloomberg Businessweek: Age of Economic Warfare
Podcast
Columbia University Senior Research Scholar and adjunct senior fellow at the Center for a New American Security, Edward Fishman on US credibility and how that is affecting its...
By Edward Fishman
