The Financial Action Task Force (FATF) has finally released its long-awaited guidance on virtual assets, laying out standards that have the potential to reshape the crypto industry in the United States and around the world. The FATF guidelines address one of the most important challenges for the crypto industry: To convince regulators, legislators, and the public that it does not facilitate money laundering.
FATF guidelines focus on decentralized finance, stablecoins, and nonfungible token.
The guidance is particularly concerned with the parts of the crypto industry that have recently brought about significant regulatory uncertainty, including decentralized finance (DeFi), stablecoins, and nonfungible tokens (NFTs). The guidance largely follows the emerging approach of U.S. regulators toward DeFi and stablecoins. On a positive note for the industry, the FATF is seemingly less aggressive toward NFTs and arguably calls for a presumption that NFTs are not virtual assets. The guidance, however, opens the door for members to regulate NFTs if they are used for “investment purposes.”
The FATF guidelines expand on the definition of virtual asset service providers.
The FATF is an intergovernmental organization whose mandate is to develop policies to combat money laundering and terrorist financing. Though FATF cannot create binding laws or policies, its guidelines significantly influence counter-terrorist financing and anti-money laundering (AML) laws among its members. The FATF’s much-anticipated guidance takes an “expansive approach” in broadening the definition of virtual asset service providers (VASPs). This new definition includes exchanges between virtual assets and fiat currencies, exchanges between multiple forms of virtual assets; the transfer of digital assets; the safekeeping and administration of virtual assets; and participating in and providing financial services relating to the offer and sale of a virtual asset.