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11 July 2022

FATF And Basel Committee Publish New Guidance On Cryptocurrencies

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BakerHostetler

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The Financial Action Task Force (FATF), a cross-border, intergovernmental anti-money laundering organization, recently released a report and update on the implementation of FATF's standards.
United States Technology

The Financial Action Task Force (FATF), a cross-border, intergovernmental anti-money laundering organization, recently released a report and update on the implementation of FATF's standards on virtual assets (VAs) and virtual asset service providers (VASPs), which were originally announced three years ago. The report emphasizes that over the last year, jurisdictions have made only "limited progress" in introducing FATF's Travel Rule, which requires VASPs to communicate the information of the originators and beneficiaries of crypto transactions that exceed a certain threshold. Specifically, FATF reports that as of March 2022, only 29 out of 98 jurisdictions have represented that they have passed Travel Rule legislation, and only 11 have started enforcement and supervisory measures. The report also finds that threats of ransomware actors misusing VAs to facilitate payments continue to grow, and ransomware cybercriminals are still relying on a small group of noncompliant VASPs and privacy coins to illegally move funds.

Last week, the Basel Committee on Banking Supervision (Committee), an international committee formed to develop standards for banking regulation, published its second consultation on the prudential treatment of cryptoasset exposures. The Committee classifies crypto assets into two groups: Group 1 includes assets that meet the Committee's classification conditions, including tokenized traditional assets and regulated stablecoins; Group 2 comprises those assets that do not meet the enumerated conditions, including bitcoin and most other cryptocurrencies. The Committee then makes recommendations for the exposure levels for banks based on that asset classification. According to the Committee, banks would subject Group 1 assets to at least equivalent risk-based capital requirements as the corresponding traditional capital assets. The Committee recommends that banks commit only 1 percent of their total equity or net asset value in either long or short positions to Group 2 assets.

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