FATF crypto rules: Anti-money laundering upgrades

Global anti-crime finance watchdog, FATF’s latest guidelines could compel an increasing number of cryptocurrency enterprises to verify their customers’ identities and backgrounds. And report any suspicious transactions to the crypto regulators.

Financial Action Task Force is an international organization that regulates government strategy against illegal finance. It has released new regulations that could drive crypto firms to take more prominent steps to eradicate money laundering.

In a report released by FATF or Financial Action Task Force, they advocated for governments to increase regulations on crypto firms. It is called on the crypto enterprises to take protective measures like verifying customers’ identities. As a result of brand-new guidelines released, cryptocurrency firms will have to take more comprehensive steps to combat money laundering.

Also Read: Crypto Assets Cause ‘Limited’ Risks to the UK Financial System Stability Says Bank of England.

Workings Of The Crypto Regulators’ Guidelines 

FATF has members from more than two dozen countries, including the United States, China, and much of Europe. The task force requires its guidelines to be implemented by national regulators to combat money laundering and financing of terrorism. This would in turn revamp crypto laws and reshape crypto regulations all across the world for the better. 

The task force members deem the owners or operators of these platforms as virtual asset service providers or VASPs. This would make them responsible for checking users’ identities and taking other anti-money laundering measures. Every crypto movement must come with explicit details of transactions and user identity under the enhanced guidelines.

Outlining The Latest Crypto Regulation

There are various ways to implement traditional financial activities using software rather than a central intermediary to work on them. DeFi is an umbrella term referring to different approaches to exercise traditional financial pursuits. Thereafter, DeFi has surged rapidly over the past year globally. It has surpassed over $100 billion of assets posted as deposits in various DeFi projects, according to market data analysts. Among those targeted by the guidelines are DeFi projects like decentralized exchanges, on which crypto merchants can exchange assets anonymously among themselves.

Under the final guidelines, programmers who write code for crypto projects but do not manage them as businesses are not subject to the regulation. Moreover, among other things, the FATF recommended that companies backing stablecoin should adhere to the anti-money-laundering rules.

In other parts of the guidelines, the FATF said companies behind stablecoins should comply with anti-money-laundering rules. Stablecoins, like tether, are digital coins that seek to track the value of a traditional currency like the dollar.

In Conclusion

Unlike some of the US-based crypto exchanges that comply with the AML rules, some countries have crypto regulators laying looser regimes. Those crypto firms do not necessarily police against all illicit crypto activities. If added to a list of jurisdictions with inadequate protections against money laundering and terrorism financing, the FATF could crack down on these countries.