The Financial Action Task Force has published a targeted report on regulatory challenges from decentralised finance that updates and complements its 2021 analysis in the Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers. The report’s central message is that applying the FATF Standards to DeFi requires a functional, risk-based approach rather than relying on labels or decentralisation claims alone. The report says DeFi remains a relatively small part of the broader virtual asset market, but its expansion and evolution since 2021 have increased its relevance to the global financial system. That shift has been reinforced by greater participation from institutional investors, virtual asset service providers and other regulated entities, which in turn raises potential exposure to money laundering, terrorist financing and proliferation financing risks. FATF makes recommendations for jurisdictions on how to regulate and supervise DeFi arrangements, including how to determine whether control exists, and also sets out recommendations for DeFi arrangements and for financial institutions and virtual asset service providers that interact with them to mitigate the risk of criminal abuse.
Financial Action Task Force2026-07-21
Financial Action Task Force updates DeFi analysis, calls for risk based supervision and clearer tests of control
The Financial Action Task Force has issued a targeted DeFi report updating its 2021 analysis as the sector has expanded and drawn in more regulated participants. It says FATF Standards should be applied through a functional, risk-based approach, and recommends that jurisdictions assess control in DeFi arrangements while DeFi operators, financial institutions and virtual asset service providers strengthen measures against criminal abuse.