Key facts:
The researchers note that the updated guide shows positive but insufficient changes.
The researchers hope that lawmakers will ignore the uncertain aspects of the FATF guidance.
Coin Center, a research center focused on public policy on cryptocurrencies, believes that the guide to regulate the sector is still “flawed.” The institution analyzed the update recently presented by the Financial Action Task Force (FATF), and its recommendations to control the use of virtual assets.
The analysis published by the researchers on their website indicates that the “expansive approach” persists in the new version of the FATF guide. By this they mean that the language used in the document is excessively broad and vague, which would make it difficult for the legislators of the member countries to set clear limits for the regulation of cryptocurrencies.
As . has reported, the FATF published in June 2019 its first draft of the guide aimed at setting standardized international guidelines to regulate the cryptocurrency sector. The update of the document, which was initially expected for the month of June of this year 2021, was delayed 4 months due to the high volume of responses received by the body, in the public consultation that it opened on the subject.
In the document sent to the FATF in the framework of the consultation, Coin Center warned that several of the guide’s definitions could “have serious human rights implications”. He also pointed out that this version of the document would be incompatible with the standards of justice, which require the absence of “gray areas” or “difficult cases.”
Coin Center researchers believe that the FATF guidance on cryptocurrencies still features vague and confusing language, incompatible with the balance of current regulations.
The good
The update of the guide seems to have collected some of the approaches presented by Coin Center, as recognized by the researchers themselves. In particular, as regards the clarification on “who is and who is not a ‘virtual asset service provider’ (VASP)”, forced to watch over their customers.
By outlining who can qualify as a VASP and therefore have to keep an eye on your clients, the new guide removes all references to people who simply ‘facilitate’ or ‘govern’ transfers and instead focuses, as we asked. , in people with ‘control of VA (Virtual Assets).’ We have worked since 2014 to get regulators to focus on the easily understood and reasonably grouped category of ‘control’, rather than vague terms (such as ‘facilitate’) that have no clear meaning in technology. We are pleased that the FATF, like FinCEN and the ULC before, have now also accepted this subtle but important clarification of who is and who is not included in the regulatory sphere.
Coin Center.
Additionally, the researchers found other positive points in the guide, such as excluding auxiliary infrastructure providers and those who relinquish control of a network after launching it from surveillance obligations. It also makes clear that the controversial “travel rule” would not apply to transactions between a VASP or cryptocurrency exchange and a “non-hosted wallet,” or to commissions paid to miners and validators.
The bad
But the changes are insufficient. The FATF has not yet made it clear that cryptocurrency transactions between two unregulated parties look ‘more like a cash transaction and should be treated accordingly, ”says Coin Center. This imprecision could leave open the possibility that cryptocurrency service providers must report information from people who are not their clients, for which they do not have the capacity or the right.
The researchers claim that vague and inconsistent statements persist in the guide, such as that a “virtual asset service provider” may be considered to be “actively facilitating” a transfer. “We still do not know what is meant by ‘actively facilitating’,” the Coin Center document reads.
Among other negative aspects, they point out the excessive breadth in the approach of decentralized finance platforms (DeFi). Similarly, qualify as “vague and confusing” expressions about control of governance tokens, and on the obligations of those who launch “automated tools”, even before they become operational.
The analysis concludes that the FATF maintains expansive language and that “it would be inappropriate for something like these confusing and unspecific standards to supersede current laws and regulations.” He also points out that the body’s recommendations are not binding and that they expect legislators from the different member countries to “ignore the uncertain aspects of the guide.”
Add Comment