FATF says progress in regulating the cryptocurrency industry is insufficient

Some jurisdictions have made progress in implementing the FATF’s revised standards, but that is not enough for comprehensive regulation of the crypto industry. In a review by the organisation.

According to the FATF, digital assets are linked to tax crimes, sanctions evasion, drug or weapon trafficking, as well as various forms of fraud.

During the coronavirus pandemic, a number of FATF members noted a broader use of virtual assets to move and conceal illicit funds. The review refers to one jurisdiction that reported using cryptocurrency to launder proceeds “from the sale of a COVID-19 drug”.

Earlier, analysts Coinfirm identified several addresses, whose owners sell fake COVID certificates, stolen vaccines and counterfeit documents.

The FATF also called for “careful regulation” of stablecoins. Experts fear that with their mass adoption the number of anonymous peer-to-peer transactions through unregistered wallets could rise.

In the course of the review the organisation found that out of 128 jurisdictions — 38 FATF members and 90 representatives of only 58 have implemented the standards. Providers of virtual asset services (VASPs) are regulated in 52 countries, with six banning their operation.

“These gaps in implementation mean that there is not yet a global approach to preventing the misuse of virtual assets and VASPs for money laundering or financing of terrorism,” the document states.

The FATF also noted a willingness from industry representatives to continue engaging with FATF.

In March the regulator proposed amendments to the guidelines for the cryptocurrency industry. According to the proposal, the regulator’s scope included decentralised finance and NFT.

In July, representatives of the cryptocurrency industry and the DeFi sector sent an open letter to FATF with their proposals for regulation.

In response to the latest @FATFNews guidance on virtual assets, last week, @BlockchainforEU @BlockchainAssn @bitcoin_ch @CryptoUKAssoc @INATBA_org & @AccessSg signed an open letter outlining guiding principles for the regulatory approach to #DeFi. https://t.co/qZ9OACdN3d pic.twitter.com/h1aMCRvcv1

— Blockchain for Europe (@BlockchainforEU) July 2, 2021

“The letter is aimed at helping authorities avoid potential traps,” the authors noted.

In their view, regulatory pressure could be “stifle innovation.” Industry representatives urged open dialogue through consultations and the formation of working groups.

In June 2019, FATF decided to require Bitcoin exchanges and other VASPs to comply with anti-money laundering and counter-terrorist financing rules in the same way as traditional financial firms.

Later, the FATF president Marcus Pleyer said there was a need to adjust the guidelines for the crypto industry as many countries had not fully implemented the previously adopted standards.

In October 2020, a consortium of leading US cryptocurrency companies presented a plan for compliance with FATF requirements.

In late February 2021, the regulator began taking feedback for amendments to the regulatory rules.

Subscribe to ForkLog news on Facebook!