The Financial Action Task Force ("FATF") urged jurisdictions to take coordinated actions to prevent the misuse of virtual assets for crime and terrorism.
The FATF also updated the FATF Recommendations to define "virtual assets" and "virtual asset service providers," and to require countries to regulate virtual asset service providers to combat money laundering and the financing of terrorism.
The FATF noted that its standards require regulation only for purposes of anti-money laundering and countering the financing of terrorism ("AML/CFT"), and emphasized that the FATF Recommendations "do not imply that virtual asset service providers are (or should be) subject to stability or consumer/investor protection safeguards."
Commentary / Christian Larson
The FATF Recommendations are recognized as the global standard for AML/CFT measures. Countries around the world change their legal regimes and enforcement practices to comply with the Recommendations (and to avoid being publically identified as non-compliant).
The FATF is now requiring the regulation (for AML/CFT purposes) of businesses that exchange, transfer, safe-keep, or administer virtual currency assets such as cryptocurrency and tokens that are not regulated as securities. A handful of countries, including the U.S., are already largely compliant with the new standard.
In the virtual asset space, regulatory uncertainty is often cited as a barrier to adoption. While the FATF's call for regulation may eventually result in some regulatory harmonization for virtual assets, the updated standards are far from rigid. The new rules are so flexible that countries can essentially regulate virtual asset service providers in any way they choose, including by banning them completely. Anyone in search of a catalyst for regulatory harmonization will need to keep waiting.
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