FATF has updated its guidelines. It aims to regulate financial activity not technology.
On Tuesday, the United States Secretary of the Treasury, Janet Yellen, clarified the Government’s position and enumerated the entities that need to abide by the Financial Action Task Force’s (FATF) standards.
The Financial Action Task Force (FATF) is a global watchdog to prevent global money laundering and terrorist financing. More than 200 countries are its members. It provides the standards and recommendations to ensure a coordinated global response for preventing organised crime, corruption, and terrorism.
Republican junior Senator from Pennsylvania, Pat Toomey submitted his questions for Secretary Yellen ahead of the Senate Banking Committee hearing.
One of his questions was about the contradiction between the guidelines of FATF and the Financial Crimes Enforcement Network (FinCEN) on the regulation of non-custodial crypto services.
FATF wants to implement all the guidelines towards Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) on the non-custodial services too.
On the other hand, FinCEN states that those providing ancillary services like miners, certain wallet providers, software developers, and other non-custodial services are not subject to Money Service Business registration.
She answered, “I agree with standing FinCEN guidance on this topic, and I believe the FATF does, too.”
She explained that FATF has clarified that the intention of the standards is not to regulate ancillary services as Virtual Asset Service Provider (VASP) or as a natural or legal person.
These entities may provide some services to VASPs, but they should not be regulated in the same way.
The ancillary services named in her answer were hardware wallet manufacturers, providers of unhosted wallets, software developers, or miners, or anyone that is not engaged in the covered activities by FATF.
The Updated Guidance for a Risk-based Approach to Virtual Assets and VASPs, which was published last month, aims to “regulate financial activity and not technology.”
So, some of the non-custodial crypto entities fall outside the purview of FATF guidelines.
Cryptocurrency is transnational in nature. It aims to have a universal financial system. That’s why regulators around the world need to collaborate. This further highlights the significance of multilateral institutions.
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