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FATF Issues Final Guideline, Targets DeFi

The next chapter for decentralized finance (DeFi) might be determined once the final guidance by the Financial Action Task Force (FATF) is declared this year’s summer.

According to reports from DeBank, the DeFi ecosystem which encompasses projects like Uniswap, Aave, Maker, and other rapidly upcoming projects has seen great growth over the past year, rocking a total value of an estimated $90 billion locked in DeFi.

The concept of decentralized finance is quite large, it is outlined as a developing class in finance that is developed using decentralized technological tools with an open spectrum that requires no permission or intermediary to be accessed. The decentralized financial ecosystem is expected to grow more and seek diversifications soon. 

Currently, DeFi offer services such as borrowing and lending, the management of assets, derivatives, margin trading, NFTS and payments.

DeFi Activities Still Monitored by Authorities 

The glare of the authorities, one of them being FATF is still upon DeFi activities. FATF being the intergovernmental policy-making body that oversees and sets international standards against money laundering and counter-terrorism through governmental recommendations has issued a draft guide that might affect DeFi projects. 

The draft guide that would be published in June will focus on the following areas.

  1. The clarity of virtual assets and VASP definitions
  2. The actual and potential risks of peer-to-peer transactions
  3. Stablecoins
  4. The registration of VASPs
  5. The Travel Rule implementation
  6. Information sharing principles among VSAP supervisors

Recall that the FAFT initially introduced the definitions of virtual assets and a VASPS to its official glossary in 2018, thoroughly expanding on the standards and recommendations from FATF that applies to them. 

Presently, Defi is operating with limited regulations in comparison to other forms of centralized finance. Likely, an issue for DeFi to submit to some sort of regulation is becoming inevitable.

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