• Lagging global implementation: Despite some progress, many jurisdictions have yet to fully implement FATF's Recommendation 15 (R.15) which deals with the licensing / registration of VASPs. Since the adoption of the standards on VAs and VASPs in 2019, 75% of jurisdictions remain only partially compliant or non-compliant with the requirements of the FATF.
• Progress in major markets: Jurisdictions with significant VA sectors have made notable advancements in establishing core AML/CFT measures, but there are still measures that need to be taken for a complete global system of AML/CFT regulation in the VA sector.
• Implementation challenges: Many countries struggle with fundamental requirements such as risk assessment and supervisory inspections. However, there are improvements, such as an increase in jurisdictions registering or licensing VASPs.

There is insufficient progress in relation to the implementation of the Travel Rule on the basis that there are:

• Legislative gaps – nearly one-third of surveyed jurisdictions have not yet passed the necessary legislation for the Travel Rule implementation.
• Enforcement issues – even where legislation exists, supervisory actions and enforcement remain low.

• Private sector developments: Despite regulatory gaps, the private sector reports increased use of Travel Rule compliance tools and enhanced risk mitigation strategies.
• DeFi and stablecoins: Decentralised finance (DeFi) platforms and stablecoins, while still a small part of the VA market, show growing risks that require ongoing monitoring and regulation. Findings in this area provide progress in regulation, supervision, and enforcement such as conducting risk assessments on DeFI and unhosted wallets.

FATF's recommendations: FATF urges all jurisdictions to expedite the implementation of its standards, particularly the Travel Rule.

FATF’s publication can be found here and targeted update on implementation of the FATF standards on Virtual Assets/VASPs can be accessed here.

Please find our previous blog post on this topic here.