A recent report reveals that the majority of jurisdictions worldwide have only partially complied with the Financial Action Task Force (FATF) recommendations for regulating virtual assets.
Some progress has been achieved, but not enough, according to a report released on July 13. Further efforts are required to fully adhere to the FATF recommendations and establish a cohesive global strategy for regulating virtual assets.
According to the study:
- 58% of jurisdictions have introduced varying levels of regulation for virtual asset service providers (VASPs)
- Only 42% have fully implemented the FATF’s “travel rule,” which mandates the exchange of customer information between VASPs.
Significant deficiencies persist in areas such as the supervision and monitoring of VASPs, the FATF stated.
Who’s complying?
Jurisdictions with the highest compliance levels typically possess well-established financial sectors and robust anti-money laundering frameworks.
Developing countries, however, encounter greater challenges in implementation.
The report underscores the critical role of ongoing international cooperation and information sharing to address these deficiencies and maintain the security and resilience of the virtual asset ecosystem, considering financial crime threats continue to rise.
Additionally, the report highlights that despite some progress, additional efforts are necessary to fully implement the FATF’s guidance and achieve a globally coordinated approach to regulating virtual assets.
US, UK crypto regulation contrasts
As the global cryptocurrency market evolves, regulators in the United States and the United Kingdom have adopted divergent approaches to bring the industry into compliance.
In the U.S., the regulatory landscape is characterized by a patchwork of rules, with various federal agencies asserting jurisdiction over different aspects of the crypto sector.
The Securities and Exchange Commission (SEC) has taken an assertive stance, classifying many cryptocurrencies as securities and actively pursuing non-compliant firms. Meanwhile, the Commodity Futures Trading Commission (CFTC) has opted for a more permissive “do no harm” approach, allowing for crypto derivatives trading.
Complicating matters further, individual US states have imposed their own licensing and regulatory requirements on crypto businesses, contributing to a fragmented compliance environment.
On January 10, the US Securities and Exchange Commission (SEC) made a significant announcement, granting certain bitcoins the same status as exchange-traded products (ETPs). This landmark approval recognized the real-world value of cryptocurrencies, paving the way for integrating more digital assets into the traditional economy. Additionally, it highlighted the SEC’s commitment to enhancing regulation of the crypto industry, a move expected to influence US regulatory and compliance frameworks in the future.
While the United States has taken a more enforcement-heavy stance on cryptocurrency regulation, the United Kingdom has embraced a more collaborative model in its efforts to bring the industry under compliance.
In the UK, a key regulatory strategy involves the implementation of the “travel rule” by the Financial Conduct Authority (FCA). This rule aligns with global anti-money laundering standards set by the FATF, requiring cryptocurrency firms to share customer information when transferring funds.
The implementation of the travel rule in the UK is crucial for combating financial crimes like money laundering within the crypto space. Aligning regulations with international standards will foster a more secure environment for crypto transactions.
Furthermore, Initiatives such as the Bank of England’s efforts on stablecoin frameworks further underscore the UK’s commitment to integrating cryptocurrencies into the broader financial system.
By adopting a collaborative regulatory approach, the UK seeks to establish itself as a leading global centre for cryptocurrency and blockchain innovation.
As both the U.S .and the UK navigate the maturing crypto market, they must balance supporting innovation with managing potential risks.