On March 19, 2021, the Financial Action Task Force (FATF) released a public consultation for its updated and finalised Draft Guidance on a risk-based Approach to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs).

The Draft Guidance was originally published in June 2019 to clearly place anti-money laundering and countering the financing of terrorism obligations on VAs and VASPs.

The updated Drafted Guidance include the following key changes:

• Clarification of the definitions of VAs and VASPs: for example, the FAFT excluded explicitly from the definitions of VAs, a bank record maintained in digital format that represents a customer’s ownership of fiat currency. Meaning that central bank digital currencies (CBDCs) are not to be considered as virtual assets.

• Guidance on how the FATF standards apply to so-called stablecoins: with an emphasis places on ML/TF risks of so-called stablecoins that can be used for P2P transactions. The FATF recommended that the risks related to these products be mitigated before such arrangements are launched.

• Guidance on the risks and potential risk mitigants for peer-to-peer transactions: with the recommendations for countries to seek to understand the ML/TF risks related to P2P transactions and how P2P transactions are being used in their jurisdiction in order to limit their exposure to the latter. Measure that can be taken by countries include denying licensing of VASPs if they allow transactions to/from non-obliged entities (i.e., private / unhosted wallets).

• Guidance on the licensing and registration of VASPs; with the recommendation that VASPs should be, at a minimum, required to be licensed or registered in the jurisdiction(s) where they are created.

The consultation is open for comments until 20 April 2021.