Anti-money laundering agency Financial Action Task Force (FATF) has released the final version of its cryptoasset guidance.
The institution first published its virtual presence guide in 2019. This guide calls for crypto-asset trading platforms and money transmitters, called virtual asset service providers (VASPs), to meet the standards applied to traditional financial companies.
The FATF then continued to review and amend the draft guideline and gathered feedback from the industry. The details of the guide, which seems to have reached its final form for now, are given below.
The organization prefers to keep it broad to ensure that jurisdictions use the definitions as needed in the fight against illegal activities. The FATF considers that understanding the function of a technology is more important than whether it fits its definition to the letter. For this reason, he states that services should be analyzed according to their function rather than how they might fit within the terminology provided by the FATF.
Virtual Assets and NFTs
The guide defines virtual assets not only as a digital representation of value, but also as an asset that must have a tradable or exchangeable component. The institution, which does not define NFTs as a virtual asset, stated that if they are used for payment or investment purposes in the application, they can be included in the scope of virtual assets. On the other hand, NFTs fall under the FATF as a financial asset as they are digital representations of other financial assets currently covered by the FATF.
In such cases, the FATF proposes a “functional approach” to regulating these new types of assets that seem to cross the boundaries of definition.
The guidance indicates that those who hold “control or sufficient influence” over a DeFi arrangement should be issued for AML purposes. This means that DeFi developers have the ability to restrict listings on DEXs, operate a domain that controls user access, or significantly interfere with the activities of a DeFi marketplace.
The guide has been interpreted as laying out how FATF standards can be applied in a DeFi regulation and encouraging countries to adopt a comprehensive approach to the definition of VASP.