Since then, the Financial Action Task Force, or FATF, introduced the controversial “rule of travel” for companies in the cryptocurrency space, the controversy has been over the relevance of the regulatory framework in place for cryptocurrencies without borders.

However, some experts believe that industry experience with the FATF guidelines is just the tip of the iceberg, pointing to more important issues in this area.

During the closing session of the V20 conference on November 18, Sean Jones said that the clash between new decentralized finance models and old organizational models has implications for both regulators and the community that has not yet taken the front line.

XReg Consulting, of which Jones is a co-founder and senior partner, is a group of former regulators with hands-on experience in government policy and regulation for blockchain and cryptoassets. During the meeting, Jones said that the FATF’s overall anti-money laundering framework, and in particular its travel forces, has emerged from a completely different work and technical time: the years when structures such as SWIFT became widespread and globalized transaction finance became popular.

Jones noted that the founding members of SWIFT, which have 239 banks in 15 countries, were well-funded and part of a mature banking industry. On the other hand, the devices that the Financial Action Task Force on Money Laundering (FATF) has identified as Virtual Asset Service Providers or VASPS come from a much smaller, lesser-known facility. For this reason, Jones said, the introduction of the route and the expectation that it can be implemented so quickly by these companies is “beyond my control.”

Despite these significant difficulties, Jones said, the structure of the FATF, while narrow, could be compatible with those parts of the cryptocurrency industry that have been “tampered with,” that is, by organizations designated the VASP.

However, over time, more and more participants are trying to restore the original vision of cryptocurrencies, starting with projects like Bitcoin (BTC) and Ethereum: de facto de-brokerage in financing transactions.

The emerging space for decentralized finance, or DeFi, represents precisely this attempt to return to the original goal of cryptocurrencies, and as they grow, large chunks of cryptocurrency will again fall out of middleware structures.

Jones said DeFi developers and users, as well as regulators, need to “wake up and smell the coffee.” She said that this initial ethic and decentralized cryptocurrency model, which aims to achieve truly unreliable transactions, “is fundamentally incompatible with how the FATF achieves its goals of preventing money laundering.”

Looking ahead, Jones said that DeFi developers and users must come together as one voice to provide effective feedback to the FATF.

She said that regulation is coming to DeFi, whether you like it or not, but if members feel that systems like the FATF Travel Rule are not up to the level of money laundering risk in their room, they need to “step up their game” and do their own thing. …

Regulators should also be aware that while the old models used by the FATF may only work in the world of mid-sized cryptocurrencies, they won’t necessarily work for DeFi.

Source: CoinTelegraph

LEAVE A REPLY