14 April 2023, Tokyo – This week, the Virtual Assets Contact Group of the Financial Action Task Force (FATF) met in Tokyo to discuss global progress and challenges in regulating virtual assets. The Group stressed that countries worldwide need to urgently implement the FATF Standards to effectively regulate and supervise this sector.

“It is becoming more and more important to strengthen AML/CFT/CPF measures on virtual assets in light of the growing risk of virtual assets being misused for money laundering, terrorist financing and proliferation financing, including theft and misuse of virtual assets by North Korea.”, Keynote speaker, Suzuki Eikei Parliamentary Vice-Minister for Financial Services, told the Group in Tokyo on Wednesday.

Since the FATF strengthened its Recommendation 15 in October 2018 to address virtual assets and virtual asset service providers, many countries have failed to implement these revised requirements, including the ‘travel rule’ which requires obtaining, holding and transmitting originator and beneficiary information relating to virtual assets transactions. The lack of regulation of virtual assets in many countries creates opportunities that criminals and terrorist financiers exploit.

The Virtual Assets Contact group brought together officials from 19 jurisdictions and international organisations and 80 industry representatives from virtual assets service providers, blockchain analytics companies, industry bodies and financial institutions. They discussed progress on implementing the FATF Standards on virtual assets (including the ‘travel rule’), challenges for effective implementation of the FATFs requirements for this sector, and emerging risks and threats.

The discussions from the meeting will feed into the 2023 FATF targeted update on global implementation of the FATF Standards (including the ‘travel rule’) and responses to emerging risks like decentralised financing (DeFi) and peer-to-peer transactions. The FATF expects to finalise the report in June 2023.

In February 2023, the FATF Plenary agreed on a roadmap to strengthen implementation of FATF Standards on virtual assets and virtual asset service providers. As part of this work, in the first half of 2024, the FATF will report on steps FATF members and FSRB countries with materially important virtual asset activity have taken to regulate and supervise virtual asset service providers.