Virtual assets likely to be defined as to capture all crypto currencies, security tokens, utility tokens or other digital assets that is tradable or transferable, with the exception of digital fiat currencies. It may also be expressed as digital representation of value that can be digitally traded, transferred or used for payment; FATF’s rules apply when virtual assets are exchanged for fiat currency, but also when they are transferred from one virtual asset to another.
Virtual assets make payment easier, faster and cheaper and provide alternative method for those without access to regular financial products. But proper regulations still need to be strengthened. The FATF has been closely monitoring the developments in the crypto sphere and in recent years has seen that the countries started to regulate the virtual assets sector, while others have prohibited virtual assets altogether. However, as yet the majority of countries have not taken any action. These gaps in the global regulatory system have created significant loopholes for criminals to abuse.
With support from the G 20, the FATF has issued global, binding standards to prevent the misuse of virtual assets for money laundering and terrorist financing. The FATF standards ensure that virtual assets are treated fairly, applying the same safeguards as the financial sector. FATF’s rules apply when virtual assets are exchanged for fiat currencies, but also when they are transferred from one virtual asset to another.
Countries need to implement the FATF measure soon; this will ensure transparency of virtual asset transactions and keep funds with links to crime and terrorism out of the crypto sphere.
Now a davs virtual assets service providers are perceived it as risky business and denied access to bank account and other regular financial services. While implementing the FATF requirements will be challenging for the sector, it will ultimately increase trust in Block chain technology as the back bone behind a robust and viable means to transfer value.
The FATF has revised its assessment methodology, which sets out how it will determine whether countries have successfully implemented the FATF’s recommendations and are regulating the virtual asset service provider sector.
The effective global implementation of these standards by all countries will ensure virtual asset technologies and businesses can continue to grow and innovate in a responsible way, and it will create a level playing field. It will prevent criminals or terrorist seeking out and exploiting jurisdiction with weak or no supervision.
Regulating virtual assets service providers is challenging for all. National authorities need to develop skills and to understand the technology involved, while the virtual assets service providers have to learn about the financial rules that now apply to their sector.
It is up to the sector itself to develop the technology to meet the FATF’s requirements, particularly when it comes to securely collecting and transmitting originator and beneficiary information. To help governments and the industry itself, the FATF has developed risk based approach guidance with significant input from the sector itself.
Written By: Sanjeev Das