FATF amended regulation for businesses dealing with cryptocurrencies and virtual assets to integrate the emerging industry into the current regulatory framework for banks
The enhanced requirements for so-called virtual asset service providers (VASPs), released on October 28, 2021, after taking into account industry comments from April 2021, imply that centralized and decentralized crypto businesses will be regulated shortly.
The Financial Action Task Force (FATF), a global anti-money laundering (AML) organization, has amended its recommendations for businesses that deal with cryptocurrencies and virtual assets.
The FATF has released a number of documents involved in determining VASPs and virtual assets, as well as advising governments on how to implement the "Travel Rule" for cryptocurrencies.
It has also included new fields such as decentralized finance (DeFi), non-fungible tokens (NFT), and decentralized autonomous organizations in its framework, in addition to attempting to account for transactions to and from "non-hosted wallets" (commonly referred to as non-custodial wallets among cryptocurrency users) (DAO).
Given that the FATF regulations primarily relate to financial intermediaries establishing advice in the fast-moving DeFi market has been difficult. According to the guidelines, those who have "control or substantial influence" over a DeFi arrangement should be controlled for AML purposes.
Some of the controversies that this guide involves are:
- The FATF's division between development businesses and individual open-source software developers is ambiguous.
- Because of the FATF's broad definition of VASP, there are some contradictions in the idea of crucial petitioners or private key holders who could sign information on behalf of digital currencies.