The Financial Action Task Force (FATF), the global body tasked to combat money laundering and terrorist financing, recently put out the Travel Rule which looks to regulate the virtual asset service providers (VASPs).
However, the recent draft of the regulations seem to target the Decentralized Finance (DeFi) and the P2P marketplace and essentially bring these under some level of control.
The document explicitly discusses the role that peer-to-peer transactions that take place between 2 unhosted wallets and without the use or involvement of a VASP are being used for money laundering and terrorist financing.
Some of the questions and concerns the regulatory draft seeks to address include:
What are the most effective ways to mitigate the money laundering and terrorist financing (ML/TF) risks relating to peer-to-peer transactions?
How are peer-to-peer transactions being used for ML/TF purposes and what options are available to identify how peer-to-peer transactions are being used?
What role and implications (e.g., benefits) do peer-to-peer transactions and unhosted wallets have in VA ecosystems?
What specific options are available to countries and VASPs to mitigate the ML/TF risks posed by peer-to-peer transactions?
Are the risk mitigation measures proposed in the Guidance in paragraphs 91-93 appropriate, sufficient and feasible?
DeFi volumes have skyrocketed in the last year with volumes hitting all-time highs in 2021 crossing over $45 billion.
At the same time, P2P volumes, especially across emerging markets like Africa, have likewise seen all-time high volumes.
At this stage, the FATF has not approved the current draft of the guidance.
In the meantime, the FATF is currently accepting response submissions from VASPs to refine the document before making further amendments at its June 2021 meetings.
If you are a VASP – Crypto exchange, node, wallet etc – you are requested to submit your comments in regards to the draft regulation.
Please provide your response to FATF.Publicconsultation@fatf-gafi.org with subject-line “Comments of [author] on the draft revised VASP Guidance”, by 20 April 2021 (18:00 UTC).
While submitting your response, please indicate the name of your organisation, the nature of your business (VASP, technology provider, academic, policy body, other regulated entity), and your contact details. The contact information you provide will be used for the purpose of this public consultation only. The FATF will not share this information with third parties without your consent.