Gafi has guided regulators around the world to pay attention to the cryptocurrency business, not technology or terminology.
The Financial Action Task Force (FATF), called Gafi in Brazil, it is the global surveillance agency against money laundering and terrorist financing, an intergovernmental institution that advises regulators on procedures in various markets.
One of the sectors under observation by Gafi has been cryptocurrencies, identified as an interesting technology for criminals to carry out transactions, in the institution’s view. Bitcoin regulation in Brazil, for example, is guided in part by the guidelines that this global institution issues in its constant reports.
In a recent report, Gafi advises that regulation is cryptocurrency businesses, not technology
On October 28th, the Gafi published updates on a March 2021 regulatory report that provides guidance on market risk-based approaches to cryptocurrencies.
In March, the recommendation was for countries to put their eyes on operations such as DeFi, NFTs and stablecoins, which can favor money laundering with virtual assets (VA).
Brokers and service providers with cryptocurrencies (VASP) should also be closely watched, as it is on these centralized platforms where problems can occur.
Thus, the new recommendation states that DeFi operators proceed to customer KYC mechanisms in the same way as they are performed on centralized platforms. In addition, they must control the transactions of users considered suspected of crimes, adopting compliance mechanisms.
Regarding NFTs, the Gafi advises regulators to observe them on a case-by-case basis, since by default they are not considered virtual assets by the money laundering institution, but they can be included if they are used as an investment or means of payment.
“Some NFTs that apparently do not appear to constitute VAs may fall within the definition of a VA if they are used for payment purposes or for investment in practice.”
With regard to stablecoins, the recommendation is similar to that of DeFi, which imposes on regulators the need to monitor the business related to cryptocurrencies, and these should not “involve only those who are developing software code, but rather people involved in stablecoin agreements that conduct or provide financial services falling within the boundaries of the VASP definition“.
Travel Rules should be implemented as soon as possible with people’s private wallets
One of the rules that the Gafi asked regulators to inspect cryptocurrency transactions requires that only shipments between VASP companies to VASP be inspected.
But in the last recommendation, Gafi asked that transactions between VASP and private portfolios start to be observed as well, indicating that cryptocurrency portfolios will start to be observed by regulators around the world.
Gafi’s new guidance on the cryptocurrency market still says that changes should be made as soon as possible, but with the application of the requirements, they can be implemented in stages to ensure sufficient time for the rules to work.
“Countries may wish to take a step-by-step approach to applying travel rule requirements to ensure their VASPs have sufficient time to implement the necessary systems, but must continue to ensure that VASPs have alternative measures in place to adequately mitigate risks of BC / FT arising from VA transfers in the interim”.