According to DeBank, the decentralized economy, or DeFi, has grown significantly over the past year, with the total value of DeFi reaching nearly $ 90 billion. The DeFi ecosystem includes projects like Maker, Aave, Compound, Uniswap and more, and there are new projects emerging quickly. DeFi is a broad concept to describe a growing financial field that has been built using the tools of decentralized technology and is characterized by openness, non-delegation, non-mediation and non-error.
DeFi’s scope is broad, and the exact extent and combination of various technology and governance features determine the extent of the deFi project’s decentralization, or whether DeFi at all. DeFi currently includes services such as lending, borrowing, derivatives, margin trading, payments, asset management and non-exchangeable tokens, and will be expanded and diversified in the future.
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DeFi’s rapidly expanding market has not escaped the attention of the authorities – the Financial Money Laundering Task Force or FATF as one of them. The Financial Action Task Force (FATF) is an intergovernmental political body that monitors and sets international standards for combating money laundering and countering terrorism through its recommendations to governments. In March, FATF released revised draft guidelines on a risk-based approach to virtual assets and virtual asset service providers, or VASPs, requesting stakeholder comments by the end of April. The final version of the guide should be published in June.
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The FATF first introduced Virtual Assets and VASPs in its 2018 glossary of terms and explicitly stated that the FATF standards and guidelines apply to them. In June 2019, the FATF released additional guidance on the risk-based approach to virtual assets and VASPs and helped authorities respond to actions with virtual assets and VASPs. In addition, it also helped private entities involved in virtual asset activities to understand AML / CFT obligations.
Next guidelines focus on six areas: 1) Virtual asset preparation and VASP definitions. 2) stable coins; 3) means to reduce risks and potential risks of peer-to-peer transactions; 4) VASP license and registration; 5) Comply with the travel rule; 6) Principles of information exchange and cooperation between VASP supervisors.
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Some of the most actively discussed issues relate to an integrated approach to identifying VASPs, whereby FATF recommendations require that all VASPs be regulated for AML / CFT purposes, and that they be licensed, registered, and monitored or supervised. They will also be subject to travel regulations. Therefore, it is imperative that all those involved in virtual asset activities have a clear understanding of whether they fall within the definition of VASP.
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DApps and VASP
VASP is defined as any natural or legal person who performs, on behalf of or on behalf of another person (for example, as an intermediary), certain actions or transactions, including exchange – either between virtual assets and fiat currencies, or between virtual assets – or Virtual Asset Transfer.
The Financial Action Task Force (FATF) recognizes that VASP activities, exchanges, or virtual asset transfers can also take place through decentralized exchanges. It is decentralized software, distributed applications, or DApps that run on a peer-to-peer network of computers running the blockchain protocol. The DApp does not consider itself a VASP, the FATF claims that it does not seek to regulate the technology and its standards must be technologically neutral.
However, the Financial Action Task Force (FATF) clarifies that it takes a broad view of virtual assets and VASP definitions, and that most current schemes include some parties that could qualify as VASPs, either during the development phase or during the project launch phase. The draft directive states that DApps typically have a “central party” involved in creating and operating an asset, setting parameters, acquiring an administrative key, or charging fees, and these entities participating in DApps could qualify as VASPs.
Which DeFi members are the potential new VASPs?
Likewise, as stated in the FATF 2019 guidelines, the owner / operator (s) is mentioned, but this time they may not only fall within the definition of VASP, but are more likely to fall under VASP as a company on their behalf clients.