1/ Like a strong weather pattern taking shape over the ocean, everyone knew an eventual landfall was coming. And it is here - @FATFNews dropped their final virtual asset service provider (#VASP) guidance this morning:
fatf-gafi.org/publications/f…
A ew thoughts…
fatf-gafi.org/publications/f…
A ew thoughts…
2/ It could be much worse.
Whatever policy makers would like to do, the Guidance recognizes that there are significant limitations on what can be prescribed in terms of the implementation of AML/CFT-related checks in DeFi protocols.
Whatever policy makers would like to do, the Guidance recognizes that there are significant limitations on what can be prescribed in terms of the implementation of AML/CFT-related checks in DeFi protocols.
3/ There are still many reasons to be concerned.
#FATF are still clearly skeptical of DeFi. The Guidance introduces two new vague standards. Even if a DeFi protocol is not “controlled”, if an entity can be identified who is engaged in “active facilitation” they may be a VASP.
#FATF are still clearly skeptical of DeFi. The Guidance introduces two new vague standards. Even if a DeFi protocol is not “controlled”, if an entity can be identified who is engaged in “active facilitation” they may be a VASP.
4/ Another point we will want to look at carefully is the concept of “sufficient influence”.
“Sufficient for what?” you may ask. Sufficient to put a scare into DeFi projects that have an entity in their ecosystem that may otherwise not have an obvious “control” relationship.
“Sufficient for what?” you may ask. Sufficient to put a scare into DeFi projects that have an entity in their ecosystem that may otherwise not have an obvious “control” relationship.
5/ All is far from lost.
Not only is this Guidance directed at national governments, who will still have to figure out how to implement these new concepts, but there is also an acknowledgment that technology may be “part of the solution” (see, eg, the last sentence of para. 38).
Not only is this Guidance directed at national governments, who will still have to figure out how to implement these new concepts, but there is also an acknowledgment that technology may be “part of the solution” (see, eg, the last sentence of para. 38).
6/ DeFi will really need to be, you know, decentralized.
My number one takeaway from reading the new Guidance is that policy makers have had it with “decentralization theater”. Simply labeling a project “DeFi” will not persuade anyone not to impose harsh new AML requirements.
My number one takeaway from reading the new Guidance is that policy makers have had it with “decentralization theater”. Simply labeling a project “DeFi” will not persuade anyone not to impose harsh new AML requirements.
7/ So what’s next?
We will all need to read the Guidance very carefully. DeFi is as flexible and creative as we are. The space is barely two years old. Most industry participants are incredibly collaboratory. We need that now. We’ll figure it out. Together! 😊
We will all need to read the Guidance very carefully. DeFi is as flexible and creative as we are. The space is barely two years old. Most industry participants are incredibly collaboratory. We need that now. We’ll figure it out. Together! 😊
8/ Additional reading.
In September, I co-authored an article in @IFLR_online imagining a possible future in which AML compliance, where required, was provided by those willing and able to take on these responsibilities - “automated finance”.
iflr.com/article/b1thnh…
In September, I co-authored an article in @IFLR_online imagining a possible future in which AML compliance, where required, was provided by those willing and able to take on these responsibilities - “automated finance”.
iflr.com/article/b1thnh…
9/ Compliance requirements apply to those in a business, not to P2P activity.
Not every user of DeFi protocols is a centralized business capable of taking on compliance duties, like the filing of “suspicious activity reports”. DeFi can, should, and will be for users first.
Not every user of DeFi protocols is a centralized business capable of taking on compliance duties, like the filing of “suspicious activity reports”. DeFi can, should, and will be for users first.
10/ The waiting is the hardest part.
Tom Petty said it best. We have been asking for “clarity” for a long time. Whether we like FATF’s idea of what that looks like, it’s now here, so at least we have something to work with as we push the sector forward.
Tom Petty said it best. We have been asking for “clarity” for a long time. Whether we like FATF’s idea of what that looks like, it’s now here, so at least we have something to work with as we push the sector forward.
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