FATF Begins Review of Countries for Compliance with Virtual Asset Regulations

The Financial Action Task Force (FATF) announced a targeted review of how countries comply with standards for virtual assets and virtual asset service providers (VASP). The focus is on jurisdictions with significant activities of such providers.

The organization intends to work more closely with selected countries: providing consultation, training, and helping to strengthen the institutional capabilities of local regulators so they can implement FATF recommendations more quickly and close gaps. The first results of the review are planned to be published in June 2027, with the next ones in October of the same year. The mechanism aims to increase transparency and accountability of jurisdictions for complying with international standards.

Why the review was needed

The decision is related to the uneven implementation of FATF recommendations. Licensing of crypto companies, risk assessment, and the Travel Rule have progressed, but effective supervision is not ensured everywhere.

In its July report, FATF listed ongoing issues: licensing and registration of VASP are weak in practice, unregistered providers are difficult to identify, and supervisory measures are insufficiently applied. Among the growing risks are the use of stablecoins in illegal operations, fraud with virtual assets, peer-to-peer transactions through wallets where users hold their own keys, and the activities of offshore providers outside effective control. A separate challenge is overseeing decentralized finance services.

What this means for the industry

The initiative is primarily aimed at national authorities and does not introduce new requirements for crypto exchanges and other VASP directly. FATF aims to accelerate the application of existing standards, particularly Recommendation 15 on virtual assets and their providers. In October, the Financial Stability Board at the G20 already pointed out gaps in the oversight of stablecoins.