The Financial Action Task Force (FATF) revised its standards in June 2019 to especially impose the implementation of AML/CFT measures on virtual asset service providers (VASPs). However, the FATF found that the cryptocurrencies called ‘stablecoins’ are vulnerable to the same ML/TF risks as some virtual assets. These vulnerabilities arise because of their potential for anonymity and for being mass-adopted on a global scale.
In October 2019, the G20 had asked the FATF to address these vulnerabilities. The FATF has thus published a report analyzing the AML/CFT issues around stablecoins, especially the ones that may be mass-adopted. The report states that under the revised FATF standards, a stablecoin could be a virtual asset or a traditional financial asset based on its exact nature. The FATF also believes that stablecoins that can be mass-adopted will be centralized to some extent. This means that a central body such as a financial institution or a VASP could govern stablecoin operations. If this is indeed the case, the revised FATF standards will require the governance bodies to fulfil all AML/CFT obligations.
To prepare for stablecoins to be used globally, the FATF has asked all jurisdictions to prioritize the implementation of its revised standards on virtual assets and VASPs. The FATF will review the implementation of these revised standards by June 2021.