Regulation
Less than 30% of jurisdictions worldwide have started regulating crypto: FATF chief
Less than 30% of the world’s jurisdictions had started regulating the crypto sector as of June 2023, according to the chair of the Financial Action Task Force (FATF). T.Raja Kumar told CoinDesk in an interview from Singapore.
This low level of attention warrants a “call to action,” Raja Kumar said. The statistic was detailed in a progress report made public on Thursday and shared with CoinDesk, which explored how dozens of jurisdictions have adhered to the FATF recommendations.
The report is titled “Status of Implementation of Recommendation 15 by FATF Members and Jurisdictions with Materially Significant VASP Activity.” THE recommendation had suggested that jurisdictions should act to better manage the money laundering and terrorist financing risks posed by crypto, and that they should license or register virtual asset service providers (VASPs) and conduct reviews of their business practices, products and technologies.
The head of the global money laundering and terrorism financing watchdog said it was ‘first report of its kind’ addressing concerns that lack of regulation ‘creates significant loopholes’ that criminals and terrorists can exploit” and is “a call to action that we need.” country to take this problem seriously.
“I would describe virtual assets as being akin to water and essentially they will be funneled into less regulated jurisdictions,” Raja Kumar said. “Criminals and terrorists are very quick to spot opportunities leading to regulatory arbitrage. We simply cannot allow this. Every link in the global chain must be strong. This is not a trivial issue.”
The FATF chief said the report aims to draw global attention to the issue as a “constructive” effort to inform regulators and the private sector of the group’s evolving standards.
“Virtual assets are inherently international and borderless, meaning that failure to regulate VASPs in one jurisdiction can have serious global implications,” the report said.
In one example, the report refers to the Democratic People’s Republic of Korea’s (DPRK) “theft and laundering of hundreds of millions of dollars in virtual assets” allegedly used for “weapons of mass destruction.”
He also noted the growing use of cryptocurrencies to collect and move funds for the benefit of terrorist groups. The report claimed that bad actors “almost exclusively” demanded ransomware payments in cryptocurrencies.
The FATF has been urging jurisdictions to fully implement its recommendations for some time. The report’s table classifies each jurisdiction as compliant, largely compliant, partially compliant, or non-compliant.
The criteria include the enactment of legislation or regulation requiring the licensing or registration of VASPs, the registration or authorization of these companies, the conduct of surveillance inspections, the taking of coercive measures against VASPs or the adoption of travel rules for them.
of the FATF Controversial ‘travel rule’ requires crypto service providers to collect and share information on transactions above a certain threshold.
In several cases, such as India, Singapore, Spain, Portugal, Italy and Malaysia, their assessments of compliance with Recommendation 15 are ongoing and the table has therefore rated them N/A (not applicable ). Other countries, such as Argentina, had conducted a risk assessment covering VASPs but had not met any of the other seven relevant criteria.
North Korea is blacklisted by the FATF, while Russia’s membership was suspended in February 2023.
Raja Kumar said the FATF does not require jurisdictions to implement its recommendations by passing laws, but government notifications could suffice.
During a FATF plenary held in February 2024, the group agreed to publish an overview of the steps taken by jurisdictions to regulate VASPs, culminating in this analysis. The 12-month review focused on the 39 FATF members and 20 other jurisdictions that host crypto-related activities of material significance.
The selection of “materially significant” jurisdictions was based on jurisdictions that hosted VASPs representing more than 0.25% of global virtual asset trading volume or that had at least one million virtual asset users.
Collectively, these jurisdictions accounted for 97% of global crypto activity.