April 01, 2024
By Sharan Kaur Phillora
T. Raja Kumar, the President of the Financial Action Task Force (FATF), highlighted a pressing issue in cryptocurrency regulation. As of June 2023, less than 30% of jurisdictions worldwide have initiated steps to regulate the burgeoning crypto sector.
Here’s what we know:
Titled “Status of Implementation of Recommendation 15 by FATF Members and Jurisdictions with Materially Important VASP Activity,” the report highlights the urgent need for jurisdictions to address the money laundering and terrorist financing risks associated with cryptocurrencies. It advocates for the licensing or registering of virtual asset service providers (VASPs) and calls for thorough reviews of their operations, products, and technologies.
Though not obligatory, the FATF’s recommendations carry significant weight. Non-compliance could lead to dire consequences for jurisdictions, including losing credibility on the global stage and potential placement on the FATF’s watchlist.
Such outcomes highlight the gravity of adhering to these guidelines, particularly in light of the crypto sector’s challenges, such as security breaches often linked to North Korea and allegations of facilitating terrorist financing.
Raja Kumar’s remarks emphasize the critical nature of the situation, likening virtual assets to water that will inevitably flow to the least regulated areas. This scenario presents a golden opportunity for criminals and terrorists to exploit regulatory gaps, a situation the FATF is keen to avoid. “Every part of the global chain needs to be strong,” Kumar asserts, stressing the importance of a unified global response to this challenge.
The report also highlights the global implications of inadequate regulation in individual jurisdictions, given the international and borderless nature. It points to instances such as North Korea’s alleged theft and laundering of virtual assets to fund its weapons of mass destruction program and terrorist groups’ increasing use of cryptocurrencies for fundraising and financial transactions.
As the FATF proceeds with its evaluations, the focus remains on ensuring that all jurisdictions take meaningful steps to regulate VASPs, thereby safeguarding the global financial system from the risks posed by unregulated cryptocurrency activities.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
