FATF Preparing Regulation for P2P Crypto Trading Platforms

The Financial Action Task Force (FATF), the G7-founded intergovernmental organization that fights money laundering, has fired a warning shot at peer-to-peer (P2P) crypto exchange operators – stating that it is “now looking closely at P2P transactions that involve a Virtual Asset Service Provider (VASP).”

Thus far, P2P exchanges have stayed largely under the regulatory radar in many jurisdictions due to the fact that they allow traders and vendors to deal directly with buyers – rather than trade on a more conventional exchange.

However, the FATF has hinted that all that could be set to change, with new regulations already in the pipelines.

Speaking at the V20 Summit, a meeting of crypto industry bodies and global regulators, Sandra Garcia, the Director of National Security, Threats and Trends, Office of Terrorist Financial & Financial Crimes at the United States Department of Treasury and the Co-Chair of the FATF’s Virtual Asset Contact Group, said that P2P-specific regulatory requirements could emerge next year.

The FATF will publish a 12-month review of progress and updated guidelines in June 2021, following on from its 2019 guideline issuance.

And although Garcia added that the FATF was “still in the early days of collecting data” on P2P platforms, it would seek to “provide clarity on what [kind of transaction] does and doesn’t involve a VASP.”

Garcia noted that the FATF was “particularly” keen to look at P2P operators who made use of “unhosted wallets.”

And although she did not name any P2P platform operators by name, she remarked that “some [companies] are claiming they only operate outside” the FATF remit’s – and as such do not need to abide by the travel rule and other anti-money laundering and counter-terrorist financing protocols.

The Virtual Asset Contact Group Co-Chair suggested that the FATF would scrutinize firms that claimed to do so and could change guidelines to ensure that P2P operators do no slip through the regulatory net.

Prior to the V20, a speaker has hinted at displeasure at the FATF guidelines system, suggesting that the travel rule may not be fit for purpose.
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