In a Tuesday report, the Financial Action Task Force, with members from about 200 countries, said stablecoins need to comply with standards to guard against money laundering and terrorism financing.
FATF is an inter-government body that sets international standards to prevent illegal activities related to money laundering and terrorist financing watchdog. It was after a 12-month review completion that the report was prepared for the G-20 finance minister and central bank governors.
The FATF Standards apply to so-called “stablecoins” to guard against money laundering and terrorist financing risks. In a report for the G20, the FATF called on countries to implement the standards as a priority. More here➡️https://t.co/J8RLICOeJ5 pic.twitter.com/YNpv1YM9cR
— FATF (@FATFNews) July 7, 2020
Lately, regulators are taking a strong stance against fiat-begged stablecoins like Tether (USDT). With the latest step by the FATF, the exchanges and other entities supporting stablecoins will likely have to verify the identities and comply with different policies.
“My assumption would be that FATF will update guidance in relations to stablecoins in the near future,” said Jesse Spiro, global head of policy and regulatory affairs for compliance technology provider Chainalysis.
Potential to be mass-adopted on a global scale
The total supply of stablecoins has doubled this year and is now quickly approaching the 12 billion mark.
Amidst this surge of stablecoins, the new rules would impose anti-money laundering (AML) and know-your-customer (KYC) requirements on stablecoins like Tether and also the new endeavors like Facebook’s upcoming Libra.
Stablecoin providers and exchanges that support coins would have to set up processes for monitoring transactions, investigations, and regulatory filings, Spiro said. Also, they would have to make sure that OTC trading desks are compliant. Tether uses Chainalysis for a part of its compliance process; Spiro told Bloomberg.
“OTC desks, there’s been a lot of illicit activity that we’ve been able to follow through,” said Spiro. “It’s something that regulators are going to be taking a long hard look at.”
The fiat-pegged digital currencies were an attempt to mitigate the extreme volatility in the cryptocurrency market. Tether, a popular stablecoin is especially used in China for fiat on- and off-ramp, since the country banned direct fiat channels in 2017. It is also used by export-import businesses in Asia.
According to FATF, “stablecoins appear better placed to achieve mass-adoption than many virtual assets.” For instance, Facebook wants its Libra to be used by 1.7 billion of the world’s unbanked.