FATF: DeFi Projects With Identifiable Controllers Should Fall Under VASP Rules
AI Market Summary
FATF reiterated that DeFi with identifiable controllers or effective centralized control should be regulated as VASPs, pushing jurisdictions to embed AML controls in contracts or interfaces and potentially prohibit non-cooperative platforms. With most jurisdictions not yet enforcing these standards, the report increases policy overhang and compliance uncertainty across DeFi, despite rising TVL. Near-term impact centers on Ethereum's DeFi ecosystem via higher regulatory and operational friction.
Impact level
● High
Affected assets
ETH/USDT+1.44%
AI Insight · ETH/USDTAI Insight
▼ Bearish
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According to Huoxing Finance, the Financial Action Task Force (FATF) said in a report released Tuesday that its standards already cover DeFi arrangements when identifiable individuals retain "control or sufficient influence," regardless of how decentralized a project claims to be.
FATF said many DeFi initiatives still show meaningful centralized features in practice, including concentrated governance token holdings, managerial decision-making, authority over upgrades, and fee or reward flows that benefit insiders.
The report groups DeFi into three buckets: projects with identifiable controllers; projects that operate as centralized systems in reality but conceal their operators; and genuinely leaderless protocols. Only the last category would sit outside FATF's standards.
Implementation remains limited. FATF said nearly 93% of jurisdictions responding to its survey have not applied the standards to any DeFi arrangements that qualify. Among 142 jurisdictions, only 26 have assessed related risks, four have put licensing requirements in place, and just two have registered or licensed relevant platforms.
FATF urged countries to require or encourage DeFi projects to build anti-money laundering controls into smart contracts or user interfaces. For platforms that refuse to cooperate, jurisdictions may ultimately bar local operations as a last resort.
The report also noted that total value locked (TVL) in DeFi reached $86.6 billion this year, up about 85% from 2023.
