to follow someone Targeted report on VASPs and digital assets, FATF The Financial Action Task Force, the global coordinator responsible for financial standards and illegal activities, has made a submission. decentralized finance reportor DeFi.
FATF standards are followed by approximately 200 countries and are complied with from time to time.
The targeted report on DeFi highlights “regulatory challenges” and implementation of FATF standards in governing participants in the DeFi sector. FATF calls for action in response to allegations of risks emerging in the DeFi sector. It also includes advice against possible abuse, stating that “DeFi activity is currently highly concentrated, with North America and Europe accounting for around 60% of global transactions, while the Middle East and Africa together are estimated to contribute less than 10%.”
The FATF notes that DeFi has grown significantly but remains largely unregulated, potentially creating opportunities for criminals to exploit. The report urges countries to take action without banning DeFi operations.
Lee Schneider, in GC Ava Laboratories, sent He expressed concern about the FATF report on X, explaining that he was disappointed with the document. Schneider says they have long wanted clear definitions of DeFi, but have been disappointed that none of them have emerged.
“Two big problems: FATF never adequately defines “control or sufficient influence.” More importantly, FATF never explains why certain forms of control should be treated as providing financial services,” says Schneider. “We have long wanted a clear definition of decentralized governance. Here’s what we propose: There is no single point of failure; There is no single source of truth; There is no single authority with the ability or legal responsibility to change transactions, balances, or ownership.”
Rather than defining the FATF, he explains, it proposes a test with little explanation of how adequate control is determined. This may lead over-regulating jurisdictions to err on the side of caution. Ava Labs’ proposed solution, which they believe is superior to the FATF draft, is as follows:
Ask if a person can:
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- execute or modify orders or transactions;
- affecting the finality of the settlement;
- change customer balances or ledger status; or
- freezing, diverting or seizing assets.
