The Financial Action Task Force (FATF) will need a new approach in crypto policing, according to XReg consulting senior partner, Siân Jones, who was speaking during the second V20 Virtual Asset Providers Conference. She particularly noted the emerging trends in Decentralized Finance (DeFi), a niche that Jones recommended FATF pay closer attention to to understand the nitty-gritty that would form part of future policy oversight.
So far, the FATF Travel Rule is the most advanced piece of oversight that governs Virtual Asset Service Providers (VASPs). The initiative, which came into action last year, requires service providers in the crypto sector to share personally identifiable information (PII) for transactions above $1,000 from one platform to another. To comply with the Travel Rule, stakeholders have some solutions, with the most popular being the InterVASP Messaging Standard (IVMS 101).
FATF Should Narrow Down on DeFi
While the Travel Rule has done it for most regulators, Jones brought FATF to pace with the developments in DeFi. She explained that DeFi removes intermediaries who would eventually make it hard for the AML watchdog to implement oversight on crypto activity within this space. Jones believed that FATF must consider new approaches to curb AML and terror-financing within this nascent industry. She said that,
“The tried and tested methods work, after a fashion, in the traditional world of money. Arguably, they can be made sort of fit the intermediated crypto world. They do not necessarily fit a DeFi world where they are not fit for purpose.”
Crypto Community More Effective in One Voice
Jones, who told DeFi stakeholders they need to ‘wake up and smell the coffee’ in matters regulation, also had some suggestions for the crypto community to enhance the cooperation in forming policies. She noted that FATF ought to double down its efforts in engaging the crypto community, including the DeFi developers. Likewise, the crypto community needs to work closer with FATF and present its opinion in a unified voice.
“Equally, the industry needs to work more closely together to present a unified voice and its engagement with the FATF and regulators.”