On March 19, the Financial Action Task Force (FATF) published draft guidance on the risk-based approach to virtual assets. The newly updated guidance now applies anti-money laundering and know-your-customer rules to stablecoins, decentralized finance (defi), and non-fungible token (NFT) assets.
FATF Defines Decentralized Exchanges and Defi as a Virtual Asset Service Providers
For a while now, cryptocurrency proponents have said that one day, global regulators would likely target decentralized finance (defi) and the latest non-fungible token (NFT) hype. For a while now, the Financial Action Task Force (FATF) has been trying to come up with a regulatory standard for cryptocurrencies businesses called a “virtual asset service provider” (VASP). Things like the FATF’s Travel Rule have always been controversial, but regulators from a number of countries have been adopting the organization’s guidance. Recently Gibraltar updated its guidance notes to align with the FATF rules and South Africa has been attempting the same.
The FATF’s latest guidance is merely an update of some of its past recommendations toward virtual assets (VA) and VASPs. However, the updated version now discusses stablecoins, defi, and NFTs, as things like decentralized exchanges (dex) are considered VASPs. The newly revised guidance suggests imposing anti-money laundering and know-your-customer (AML/KYC) rules toward dex applications. The FATF calls these platforms “Decentralized or distributed applications (dapp) or a platform that offers “exchange or transfer services.”
“A dapp, for example, is a term that refers to a software program that operates on a P2P network of computers running a blockchain protocol— a type of distributed public ledger that allows the development of other applications,” the latest guidelines note. “These applications or platforms are often run on a distributed ledger but still usually have a central party with some…