Financial Action Task Force “FATF” Provides Explanatory Guidance on “DeFi” and “NFT”
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Answer Financial Action Task Force “FATF” Provides Explanatory Guidance on “DeFi” and “NFT”
The Financial Action Task Force (FATF) has issued guidance on digital currencies and virtual asset service providers (VASPs).
But the inclusion of decentralized finance (DeFi) and non-fungible tokens (NFT) within the regulations has sparked new controversy.
Just one week after the FATF announced it was ending its cryptocurrency guidance, the global anti-money laundering watchdog released an updated version yesterday, October 28.
The guide contains explanations of the platforms that deal with virtual assets.
The draft addressed to virtual asset service providers (VASP) called for the need to respect and comply with the standards applicable to legacy financial institutions.
Increased FATF censorship of the crypto world:
Firms offering services related to stablecoins, blockchain-based decentralized finance (DeFi) applications and peer-to-peer (p2p) transaction facilitation platforms may have to keep a close eye on their customers’ credentials and funds to avoid money laundering and terrorist financing.
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In short, these platforms are required to abide by all existing rules and conduct comprehensive anti-money laundering (AML) and terrorist financing checks.
In the case of peer-to-peer transactions, the FATF Guidelines have stated that states may impose practices such as record keeping or cap transactions at only certain approved addresses.
As a quote from the FATF statement:
Countries and VASPs should strive to understand the types of P2P transactions that pose higher or lower risks and to understand the drivers of P2P transactions and their different risk profiles.
DeFi under the watchful eye of the FATF:
Not surprisingly, the FATF’s guidelines aim to increase its regulatory oversight and bring the cryptocurrency industry into line with traditional finance for a long time.
The message given out loud was clear.
But what infuriated some members of the crypto community was when the international body touched on the topic of DeFi and NFT.
According to the published document, creators, owners, operators or any individual with influence in DeFi arrangements may be required to comply with the rules set by the watchdog.
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In the NFT, the directive clarified that these tokens are included in the FATF’s definition of virtual assets (VA).
However, regardless of the terminology, the rules of the FATF may still apply to the NFT.
The DeFi community was not happy with the latest guidelines.
Miller Whitehouse Levine, policy director at the newly created DeFi Education Fund, criticized the FATF in his tweet and noted that the group wants to crack down on decentralized systems:
1/ 🚨 Long thread on the crypto + DeFi guidelines issued by the Financial Action Task Force.
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tl: Doctor, that’s not cool.
My initial reading is that the FATF sees a world where unlicensed + decentralized systems are – at best – suppressed.
– Miller (@millercwl) October 28, 2021
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