AML Rules That Target DeFi And NFT Could Be Fatal: Analyst Opinion

AML rules that target DeFi and NFTs could be fatal according to an analyst opinion speaking on the FATF proposals so let’s read more in our latest cryptocurrency news.

The FATF published draft guidance that categorized DeFi as Virtual Asset Service Providers that has to combat financial crimes but critics said that the guidance isn’t realistic by the industry should not just avoid it as it carries fatal implications. The FATF or the Financial Action Task Force is a global anti-money laundering watchdog that is based in Paris, released draft guidance on Friday and it adopted, it poses a huge threat to the booming NFT and Defi markets. In the new guidance, the FATF defined Defi operators as “Virtual Asset Service Providers” which means that if the rules are adopted in the US, many Defi platforms will have to find a new way to comply with the rules around combating finance but it’s not going to be easy.

Reading the #FATF updated draft #vasp guidance. https://t.co/ISnjhhAAap

“You’re a VASP! And you’re a VASP! And you’re a VASP!!”

Sigh. pic.twitter.com/Rx5ehKCaN5

— So-Called Lewis Cohen (@NYcryptolawyer) March 21, 2021

The decentralized finance space is a general term for non-custodial and peers to peer financial services so all Defi protocols use smart contracts to allow money to flow between traders and usually exist on the ETH network by allowing their users to use bank-like services without having a need for a bank or other third-party intermediary. The AML rules are embedded in a 99-page document and if adopted by the governments, it could prove fatal for the industry.
buy tadalafil online https://royalcitydrugs.com/tadalafil.html no prescription

The document referred to NFTs that are able to facilitate money laundering and terrorism financing as virtual assets, leaving room for those that cant be used as such to fall under these guidelines. Most of the thinking behind the guidance is alien and cannot be applied to Defi according to the analyst:

 “A VASP in centralized finance can technically comply with requirements like Travel Recommendations 16, because it has to work with current financial institutions; it has to have a relationship with a bank for a fiat on-ramp, and it needs to custody crypto funds. But DeFi is totally peer-to-peer; you’re swapping, not transacting. There are no counterparties involved here. So the logic of centralized finance doesn’t apply here at all.”

Another analyst explained:

 “FATF basically concludes that the risks associated with DeFi are greater than its societal benefits,” he said, “and so they are recommending to the governments that they do everything they can to stop digital asset-related financial relations that aren’t intermediated.”