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Comments of Global Digital Finance on the draft revised VASP Guide

GDF has submitted a response to the public consultation on FATF draft guidance on a risk-based approach to virtual assets and virtual asset service providers.

Our cross-industry expert AML working group led by Malcolm Wright and Nicky Gomez, and now comprising 82 members has worked tirelessly to provide a supportive response to the consultation. Huge thanks to all of the AML Working group who supported this detailed response. This important consultation will shape AML regulation for years to come.

Below is the Executive Summary included in our consultation response followed by the full document.

Executive Summary


●    GDF members are appreciative of the additional clarifications provided by the Guidance, particularly in respect of the travel rule.


●    However, there are concerns with regards to unintended consequences: Discrepancies in the Level-Playing Field concepts may have unintended consequences, particularly for centralised VASPs who may face increasing regulatory burdens compared to other sectors. GDF recommends the level-playing field concept should be based on functional and operational equivalency Parties may be classified as VASPs who may not, in fact, be responsible for AML/CFT governance of a given VA project so may face an unnecessary regulatory burden, alongside increasing responsibilities for supervisors.Guidance towards countries may give rise to VA restrictions that are disproportionate or not appropriately assessed for inherent risk. Further the Guidance notes training for competent authorities and supervisors but not for national risk assessors. The consequences may stifle innovation, cause liquidity events, and limit advances towards financial inclusion – all of which would be detrimental to customers as well as technological developments in the financial ecosystem.

●   Public Private Partnerships, as well as the role of Self-Regulatory Bodies (SRBs) should be encouraged to continue to foster a deep level of understanding by both policy makers and competent authorities, as well as the industry. Taking place at both national and international level, this will ensure regulation is right-fit and appropriate to mitigate AML risks whilst allowing innovation to flourish.

●    The Guidance does not appear to correctly classify or document stablecoins, and as a result some amendments are requested in respect of how stablecoins, and guidance towards their oversight, is characterised.

●    GDF proposes an innovative solution to shorten the travel rule sunrise period and accelerate licensing times utilising the existing GFIN global sandbox resources in the network. Within this solution VASPs could automatically be placed into a sandbox to operate as licensed or registered for a fixed period of time without penalties whilst they continue to implement a travel rule response.

●    GDF also proposes a regulatory regime similar to MVTS whereby a VASP would have a primary supervisor where full licensing would apply, and supplementary registrations in host countries where the VASP has customers. Again, this would likely accelerate licensing / registration as well as travel rule implementation. This would require a level of regulatory equivalency that is briefly discussed in the following section.


●    More clarity is sought on intermediary VASPs and scenarios on when Recommendation 13 would / would not apply.

Supervisory Network


●    GDF is mindful that the FATF has numerous projects and cannot solely focus on VAs to the detriment of other financial service sectors that require attention.

●    However, VAs and VASPs require more than a point-in-time Guidance, as their constant evolution, the evolution of the regulatory landscape, and the level of technical knowledge and expertise needed in order to effectively legislate for and supervise the sector requires an ongoing dialogue by all stakeholders.

●    We believe that creation of a “supervisors’ network” in the context of the Travel Rule implementation as well as other VASP AML obligations is essential to ensure a harmonised approach that can support the goals described above.

●    If the FATF is, for whatever reasons, unable to continue to actively lead such ongoing dialogues, or would like to extend its capacity into the global VASP community, GDF would welcome the opportunity to provide support and as an independent global convener. 

●    GDF currently runs a Regulator ONLY Forum with more than 25 jurisdictional regulators and global agencies. This “stewardship platform” between the global industry and regulators is designed as an “observation deck” for regulator-only purviews of codes and standards, and to enable the GDF community to respond to specific emerging regulatory priorities (e.g. DeFi, Stablecoins, etc.) through education, deeper dives, multi-bilaterals, or further consultative work with industry players.

We look forward to being part of a continued productive dialogue with the FATF and the private sector to ensure policy continues to foster responsible innovation in these quickly changing markets.

Yours faithfully,

The GDF Board