FATF Offers New Crypto Guidelines

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  • The FATF has offered updated guidance for crypto operators
  • DeFi is targeted in the update, with the FATF considering DeFi developers and operators within their remit
  • The agency also called for more urgency in implementing the Travel Rule

The Financial Action Task Force (FATF) has offered updated guidance to virtual asset service providers (VASPs), with the DeFi industry a particular focus. The new guidance, published this week, addresses issues flagged up in the FATF’s 12-month review and reflects input from a public consultation in March-April 2021 this year. The update provides significant additional guidance regarding the DeFi industry, despite the fact that DeFi applications are not considered VASPs under the FATF own standards.

DeFi Protocols Can be VASPs Says FATF

The updated FATF guidance states that DeFi developers and maintainers can actually be considered VASPs despite the fact that the FATF’s own standards “do not apply to underlying software or technology”:

Creators, owners and operators or some other persons who maintain control or sufficient influence in the DeFi arrangements, even if those arrangements seem decentralized, may fall under the FATF definition of a VASP where they are providing or actively facilitating VASP services.

NFTs Not Considered Virtual Assets

Alongside updated guidance on which entities can now be considered VASPs, the new FATF guidance also addresses non-fungible tokens (NFTs), stating that they are excluded from the FATF definition of virtual assets but warning that countries should still “consider the application of the FATF standards to NFTs on a case-by-case basis” as they “would be covered by the FATF standards as that type of financial asset.”

As usual the update discusses Anti-Money Laundering measures, calling for increased urgency from global regulators to implement the Travel Rule which would see additional details and reporting of all crypto transactions over $1,000.