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Uncertainty is the enemy of all business. And unfortunately for many Blockchain companies, they have been tightrope-walking across a gaping void when it comes to cryptocurreny regulation. But what is the role of the Financial Action Task Force (FATF) when it comes to this area?
Meet the Financial Action Task Force
The FATF is an international organisation based in Paris. It was established in 1989 by the G7 with a lofty goal: to set the standards and promote effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
Its guidelines against money laundering are still recognised international standard.
The FATF currently has over thirty member countries. European countries make a large percentage of the member states, including the United Kingdom, Switzerland, Germany, France, and others.
As part of its roles, the FATF reports to other global and regional bodies like the G20 on the standards for these financial aspects.
The FATF also issued a blacklist called Call for Action, which lists all the countries that do not cooperate in the fight against money laundering and terrorist financing, with the purpose of urging those jurisdictions to apply enhanced due diligence and counter-measures against the risks for international finance coming from them.
The need for regulatory clarity
Many people in the space argue that cryptocurrency regulation will only serve to hamper or curtail innovation. However, most legitimate Blockchain companies crave regulatory clarity in order to grow their businesses.
When a chief executive officer is unsure whether their technology, product, or operational activity will become illegal from one day to the next, it is pretty hard to plan their next move or win investors over.
The former FATF’s president Marshall Billingslea acknowledged in October 2018 that current AML standards for cryptocurrencies were «creating significant vulnerabilities for both national and international financial systems».
What about the FATF and cryptocurrency regulation?
The Financial Action Task Fore has released preliminary guidelines for cryptocurrencies heeding calls to review its cryptocurrency standard.
In 2019, FATF came with preliminary crypto requirements. According to the guidelines published on its website, the agency said it has been working on an interpretive note to a recommendation it made in October 2018 to clarify how the FATF standards apply to activities or operations involving virtual assets.
It noted that the new notes of the interpretive note have been finalised last year.
The content of FATF crypto guidelines
The FATF recommended that countries should consider virtual assets as property, proceeds, funds, or other assets, or other corresponding values and as such apply its guidelines for virtual assets and virtual asset service providers (VASPs).
These guidelines require digital assets to be registered in their countries of origin to prevent money laundering and terrorist financing with cryptocurrencies while issuers of these assets should also be registered.
Furthermore, FATF recommends a government regulation that can provide criminal and civil sanctions as well as freeze transfers, as against self-regulatory practices.
Also, the agency requires that digital asset providers keep records of sender and recipients of digital assets which can be provided to local and international authorities.
