FATF wants to ‘gut’ DeFi with ‘vague’ new guidelines, crypto players say

The crypto community has given a wilting reaction to the Financial Action Task Force (FATF) refreshed direction, given recently with one regretting that the document is terrible to the point that it makes the infrastructure bill look sensible. Most show up especially irked by the bodys position on decentralized finance (DeFi). As revealed, the FATF, which polices globalanti-money laundering (AML) and combating the financing of terrorism (CFT) endeavors, has looked to bring non-fungible tokens (NFTs), DeFi, peer-to-peer (P2P) exchanging, and stablecoins interestingly with its new rules, the most recent in a progression of periodical reports on its 2019 proposals.

Boiron added that the FATF appears to require that “an intermediary must be inserted to serve as a virtual asset service provider .”

Marc Boiron, the General Counsel at the decentralized exchange operator dYdX, made the infrastructure bill comparison above, and wrote that if the guidelines were to be implemented across the board “only permissioned DeFi” would “be allowed.”

“The global impact of these recommendations is an attempted kill shot at DeFi,” he wrote, adding that the FATF was “gutting DeFi in favor of TradFi .”

“When Satoshi deployed Bitcoin, he controlled the network, which provided VASP functions, such as transfer of crypto. That moment required Satoshi to ensure VASP compliance forever.”

Boiron also refuted the notion that crypto project developers could ever escape FATF guidelines if taken at face value, noting that bitcoin (BTC) “would not exist if a country had adopted this guidance and Satoshi had complied with all laws.” This would be because, he explained:

Miller Whitehouse-Levine, the Policy Director at the DeFi Education Fund, lamented that the FATF “sees a world in which permissionless and decentralized systems are – at best – suppressed.”

Whitehouse-Levine was upbeat on short-term prospects, however, opining:

“Notwithstanding these concerns, the real-world implications of this guidance will likely be relatively limited. We’re a long way from ‘on the ground’ implementation of any of this.” The American crypto lawyer and the strategic advisor at Variant Fund Jake Chervinsky was stoical, claiming that the new guidelines were “marginally better than the March draft.”

He summarized: “As often happens, industry explained why the draft made no sense, the FATF’s reaction was just to make it more vague. No answers here. The saga continues.”

Another United States-based lawyer, Lewis Cohen, agreed that the guidelines “could be much worse,” although he conceded that the FATF is “still clearly skeptical of DeFi.” He opined that the guidance “introduces two new vague standards.”

“Even if a DeFi protocol is not ‘controlled,’ if an entity can be identified who is engaged in ‘active facilitation,’ they may be a VASP,” he said. Cohen continued:

“Whatever policymakers would like to do, the Guidance recognizes that there are significant limitations on what can be prescribed in terms of the implementation of AML/CFT-related checks in DeFi protocols.” The American crypto pressure group Coin Center, meanwhile, offered its own thoughts in a post on its website, where it called the guidelines “far too vague and verbose to actually create reasonably clear and narrow limits for surveillance obligations.”

News Summary:

• FATF wants to ‘gut’ DeFi with ‘vague’ new guidelines, crypto players say
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