This week, the Financial Action Task Force (FATF), a global AML/CFT watchdog founded by the G7, published its new proposed draft guidance on virtual assets, which now applies AML and KYC rules to Stablecoins and Non-Fungible Token (NFT). NFTs, which utilize blockchain - the same technology that fostered the growth of cryptocurrencies - have exploded in popularity in recent weeks.
As TechCrunch reported last week, blockchain experts now fear that NFTs could be exploited for money laundering as “compliance in relation to these NFTs is a gray area.” The FATF draft, which seeks to amend the group’s 2019 guidance, appears to be the global watchdog’s attempt to keep up with the fast-moving virtual asset sphere. In fact, less than 2 days following the FATF’s publication, both Paypal and VISA, each with more than 50% market share in their respective spaces, entered the game, with the latter billing the introduction of its stablecoin as “a major industry first in bridging the worlds of digital and traditional fiat currencies.”
In the two short years since the group’s last guidance, digital assets, seen by some as “a viable alternative to monetary monopolies by national governments,” has experienced unprecedented adoption as the crypto-market cap surpassed the entire GDP of Canada this month, the world’s 9th largest economy! While the illicit share of all cryptocurrency activity identified by a leading RegTech provider fell to just 0.34% in 2020, the proliferation of novel digital assets, from virtual art to central bank digital currencies (CBDCs), aided by the underlying blockchain technology risks undermining the globally coordinated effort to battle financial crime as the concept of an alternative to the status quo gains steam.