Updated Guidance on Virtual Assets from FATF: Impact on Decentralized Finance (as of March 09, 2022)
FATF Expands Regulatory Framework to Include Decentralized Platforms, Stablecoins, and NFTs
The Financial Action Task Force (FATF) has updated its guidance to help crypto businesses understand their Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) obligations, although the guidance is not legally binding. The updated framework now explicitly includes decentralized platforms, stablecoins, and Non-Fungible Tokens (NFTs) as virtual assets subject to AML/CFT controls.
Evolution and Scope Expansion
Since 2018, and further clarified in 2019 under FATF Recommendation 15, virtual assets (VAs) and virtual asset service providers (VASPs) – including entities handling decentralized finance (DeFi), stablecoins, and NFTs – have been brought under AML/CFT regulatory requirements such as licensing, customer due diligence, and transaction monitoring. The Travel Rule (FATF Recommendation 16) has also been extended to cover crypto exchanges and platforms dealing with virtual assets, increasing transparency in cross-border transactions.
Focus on Decentralized Platforms and Stablecoins
The FATF 2025 report highlights growing concerns around the illicit use of stablecoins and decentralized finance. Stablecoins are increasingly implicated in on-chain illicit activity, including fraud and large-scale thefts. This has intensified regulatory scrutiny of stablecoins and DeFi protocols. The FATF recognizes challenges in enforcing AML/CFT obligations in decentralized environments, especially where unhosted wallets or peer-to-peer transactions are involved.
NFTs and Virtual Assets
While NFTs fall under the broader category of virtual assets, the FATF's stance involves applying the same AML/CFT principles as for other VAs. This requires VASPs involved in NFT transactions (e.g., marketplaces) to comply with licensing, Know Your Customer (KYC), and transaction reporting standards. Given NFTs’ unique characteristics, such as ownership and transferability via blockchain, the FATF’s framework stresses risk assessments that take into account their susceptibility to illicit finance risks.
AML Implications for Countries Following FATF Standards
Countries adhering to FATF standards are mandated to establish robust licensing/registration regimes for VASPs, which now increasingly cover decentralized platform operators and entities associated with stablecoins and NFTs. There is a growing obligation for active supervision and enforcement, with countries required to treat VASPs with the same regulatory rigor as traditional financial institutions. Jurisdictions face pressure to enhance risk assessments of virtual assets, including stablecoins and NFTs, and to enforce compliance with the Travel Rule, despite technical challenges posed by decentralized architectures and unhosted wallets.
The global implementation is progressing but uneven: as of mid-2025, about 40 out of 138 jurisdictions were “largely compliant” with these standards, reflecting ongoing challenges such as licensing delays or rejections, especially in fintech hubs.
In summary, the FATF has expanded its regulatory framework to explicitly include decentralized platforms, stablecoins, and NFTs as virtual assets subject to AML/CFT controls. This entails mandatory licensing, supervision, customer due diligence, and information sharing through the Travel Rule for VASPs dealing with these assets. Countries following FATF standards are required to implement these measures, balancing innovation with the mitigation of money laundering and terrorist financing risks. However, technical and enforcement challenges remain, driving ongoing updates to guidance and cooperative efforts.
Decentralized services (DEXes, DApps, and P2P platforms) may in certain cases fall under the AML scope. Estonia is one of the first jurisdictions to change its legislation to comply with the FATF's approach to decentralized platforms. If adopted in countries following FATF Standards, the new guidance may affect regulations on virtual assets (VAs) and VASPs, including NFTs, stablecoin providers, and decentralized platforms.
- The updated regulatory framework by the Financial Action Task Force (FATF) now includes decentralized platforms, stablecoins, and Non-Fungible Tokens (NFTs) as virtual assets subject to Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF) controls.
- Countries adhering to FATF standards are mandated to establish licensing/registration regimes for Virtual Asset Service Providers (VASPs), which now encompass operators of decentralized platforms, entities associated with stablecoins, and marketplaces dealing with NFTs.
- The FATF's stance on NFTs involves applying the same AML/CFT principles as for other virtual assets, requiring VASPs involved in NFT transactions to comply with Know Your Customer (KYC), licensing, and transaction reporting standards.
- The regulatory scrutiny of stablecoins and Decentralized Finance (DeFi) protocols has intensified due to their growing involvement in on-chain illicit activity, such as fraud and large-scale thefts, causing challenges in enforcing AML/CFT obligations in decentralized environments.
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