FATF warns that centralized elements persist in DeFi and should be regulated, threatening outright bans for non-compliant platforms.
Regulation & Gov ·
The Financial Action Task Force said in a new report that many decentralized finance platforms retain centralized elements and should face regulation as virtual asset service providers, with outright bans available as a last resort for those refusing to comply. The watchdog argued that its anti-money-laundering rules already apply wherever an identifiable person maintains control or sufficient influence over a DeFi arrangement, regardless of how decentralized a project presents itself. Signs of such control include concentrated governance tokens, upgrade keys, fee-setting authority, and corporate entities that employ core developers or hold treasuries.
According to the FATF report, nearly 93 percent of surveyed jurisdictions have yet to apply its standards to any qualifying DeFi arrangement, and only two have ever licensed or registered a platform under such rules. The watchdog wants countries to require or encourage DeFi projects to build anti-money-laundering controls directly into their smart contracts and interfaces, including sanctions screening and proof-of-KYC checks.
Whether jurisdictions will act on the guidance remains unclear. FATF recommendations are not law, but member countries face potential listing on a "grey list" if they persistently fail to enforce compliance. The report does not specify a timeline for implementation or detail what constitutes adequate cooperation before a ban would be triggered.