The Financial Action Task Force (FATF), an intergovernmental organisation established to combat money laundering around the world, has issued recommendations about the kinds of regulations countries should put in place to combat money laundering and the like. The FATF’s mandate has since expanded to combat any quote threats to the integrity of the international financial system which of course includes cryptocurrency given that its implicit and explicit purpose is to replace the financial system the FATF is trying to protect. The FATF has recently published a report about the current state of conformity with the crypto industry’s compliance with its recommendations.
The Growing Trend of Crypto Regulation
Over the past few months, there has been a surge in calls for crypto regulation all over the world. Some countries have already started to crack down on crypto, and the recent market crash has accelerated this trend. The roots of this trend can be traced back to a set of recommendations by an international organization called the Financial Action Task Force (FATF).
The FATF: A Brief Overview
The FATF is an intergovernmental organization consisting of 40 countries and various international organizations like the World Bank, International Monetary Fund, and United Nations. It was founded to combat money laundering and other threats to the international financial system, including cryptocurrency.
The FATF achieves its mandate by issuing recommendations about the regulations countries should put in place to combat money laundering. Its most well-known recommendation is the “travel rule,” which requires tracking of transactions above a certain amount.
The FATF’s Recommendations for Cryptocurrency
The FATF issued its final recommendations for cryptocurrency in 2019, which involve labeling all crypto transactions that preserve privacy or don’t involve an intermediary as high-risk, with the goal of eliminating cryptocurrency as we know it today. However, only around 30% of relevant countries have implemented crypto regulations in accordance with the FATF’s recommendations.
The FATF’s Recent Report on Crypto Regulations
The FATF recently published a report, titled “Targeted Update on Implementation of FATF Standards on VASPs,” which highlights the progress made by countries in implementing crypto regulations. The report reveals that only 29 of 98 relevant countries are tracking crypto transactions above a certain amount, and only 11 of them have enforced related regulations.
The FATF demands that countries pass laws to track crypto transactions as soon as possible and asks regulators to closely monitor decentralized finance protocols and non-fungible token (NFT) markets. The report also implies that exchanges offering privacy coins are non-compliant.
The FATF: A Scam?
Some critics have called the FATF a scam, as it operates outside the constraints of democratic institutions and has significant power over countries’ financial systems. Regardless of one’s opinion on the FATF, it is clear that there is a growing trend of crypto regulation worldwide, and it remains to be seen how this will affect the crypto market in the long run.