Reports

Want to learn more about crypto assets? We have selected the right materials for you.

FATF 2024 Targeted Update on Implementation of Virtual Asset Standards

The Financial Action Task Force (FATF) provides an annual update on the global implementation of its anti-money laundering (AML) and counter-terrorist financing (CFT) standards for virtual assets (VAs) and virtual asset service providers (VASPs). This report highlights progress, challenges, and emerging risks related to crypto-asset regulation.

Key Highlights

Slow Global Implementation: Despite some progress, 75% of jurisdictions are still partially or non-compliant with FATF Recommendation 15, which sets AML/CFT requirements for VAs and VASPs. Many have yet to conduct risk assessments or enforce regulations effectively.
Lack of Travel Rule Compliance: One-third of jurisdictions that allow VASPs have not yet implemented the Travel Rule, which requires the collection and sharing of transaction data. Even in countries with regulations, enforcement remains weak, with only 26% of compliant jurisdictions taking enforcement actions.
Stablecoins & DeFi Risks: The use of stablecoins in illicit activities is growing, with many being exploited for money laundering and terrorist financing. Decentralized Finance (DeFi) platforms also present regulatory challenges due to their lack of clear governance structures.
Regulatory Arbitrage & Offshore VASPs: Many VASPs relocate to jurisdictions with weaker oversight, making enforcement difficult. FATF calls for stronger measures to regulate offshore entities that serve customers in regulated markets.
Unhosted Wallets & Peer-to-Peer (P2P) Transactions: Increased use of unhosted (self-custodial) wallets and direct P2P transfers complicates AML/CFT enforcement. FATF urges regulators to assess risks and develop mitigation strategies.
Next Steps: FATF will continue monitoring and updating its list of jurisdictions with significant VASP activity. Further reviews of compliance will be conducted in 2025, with an emphasis on the Travel Rule and enforcement actions.

IMF-FSB Synthesis Paper: Policies for Crypto-Assets (September 2023)

This report consolidates policy recommendations from the International Monetary Fund (IMF) and the Financial Stability Board (FSB) to address the macroeconomic and financial stability risks associated with crypto-assets. It aims to provide a coordinated global policy approach without introducing new regulations.

Key Highlights
Macroeconomic and Financial Stability Risks: Widespread crypto adoption could undermine monetary policy, disrupt capital flow management, and increase fiscal risks. Crypto-assets, particularly stablecoins, may threaten financial stability through market volatility, regulatory gaps, and enforcement challenges.

Regulatory and Policy Recommendations:

Comprehensive Oversight: Strong regulatory frameworks for crypto-assets, ensuring financial integrity, investor protection, and market stability.
Financial Integrity: Full implementation of FATF AML/CFT standards, including regulation of virtual asset service providers (VASPs) and enforcement of the Travel Rule.
Stablecoins and DeFi: Stricter governance, risk management, and redemption guarantees for stablecoins to prevent financial instability.
Jurisdiction-Specific Approaches: Emerging markets and developing economies (EMDEs) may adopt stricter measures to mitigate risks unique to their financial systems.

Implementation Roadmap:

Global coordination among IMF, FSB, FATF, and other standard-setting bodies (SSBs).
Enhanced data collection to improve monitoring of crypto-asset risks.
Increased outreach and capacity-building for non-G20 jurisdictions.
Review of regulatory frameworks by end of 2025.

G20 Crypto-Asset Policy Implementation Roadmap: Status Report (October 2024)

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) prepared this report to assess global progress in implementing crypto-asset regulations. It reviews developments in policy frameworks, international outreach efforts, data collection improvements, and key regulatory challenges.

Key Highlights

Global Regulatory Implementation: Nearly all FSB member jurisdictions are developing or revising their crypto-asset regulatory frameworks. Most aim to align with FSB standards by 2025, but regulatory arbitrage and compliance gaps remain a challenge.
Market Trends & Financial Stability Risks: While crypto-asset markets rebounded in late 2023 and early 2024, their integration with traditional financial markets is increasing. Stablecoins are growing in market value but remain largely used within the crypto ecosystem rather than for real-world payments.
Challenges in Enforcement & Compliance: Cross-border crypto activities, particularly from offshore jurisdictions, complicate enforcement efforts. Many jurisdictions struggle with non-compliance, regulatory gaps, and data collection issues.
Stablecoin Oversight: The FSB recommends stricter regulations for stablecoins to ensure financial stability and mitigate risks related to illicit finance.
Institutional Capacity Building: The IMF, FSB, and standard-setting bodies (SSBs) are conducting global outreach efforts, including training programs and technical assistance for regulatory authorities beyond G20 jurisdictions.
Next Steps: The FSB will review the implementation of its framework by the end of 2025. Global institutions will continue strengthening policy coordination, regulatory enforcement, and data transparency.

Assessing Macrofinancial Risks from Crypto Assets

This document explores the challenges and risks posed by crypto assets to the financial system. The authors advocate for a comprehensive regulatory framework and robust risk assessments to mitigate potential systemic risks associated with the evolving crypto ecosystem.

Key Highlights:

The paper introduces a conceptual macrofinancial framework aimed at understanding and tracking systemic risks linked to crypto assets. Central to this framework is the Crypto-Risk Assessment Matrix (C-RAM), which serves to summarize vulnerabilities, key indicators, potential triggers, and policy responses relevant to the crypto sector at the country level. This matrix is intended to support regulators and policymakers in incorporating crypto-specific vulnerabilities into broader financial systemic risk assessments.

The authors acknowledge both the innovative benefits of crypto assets—such as increased payment efficiency and reduced transaction costs—and the significant risks they pose. These risks include extreme market volatility, transparency issues, liquidity challenges, and the potential for financial disintermediation. A crucial concern raised is the possibility of contagion, where defaults or failures within the crypto sector can quickly affect traditional financial markets, leading to increased instability across the financial landscape.

Digital Assets Regulation: Insights from Jurisdictional Approaches

The report published by the World Economic Forum in October 2024 examines the evolving landscape of digital asset regulation across various jurisdictions as the market for digital assets grows significantly. By analyzing the regulatory frameworks, outcomes, and unintended consequences in nine leading jurisdictions—including the European Union, the United Kingdom, and the United States—it aims to provide insights and recommendations for effective regulation. The rise in digital asset adoption and the establishment of differing regulatory timelines and approaches have created a pressing need for cohesive guidelines that protect consumers while fostering innovation.

Key Highlights:

The report emphasizes the importance of diverse regulatory strategies adapted to local contexts rather than a singular regulatory framework. It highlights that as of September 2024, a considerable portion of jurisdictions are working towards or have established regulations for digital assets with goals primarily focused on investor protection, financial stability, and combating illicit activities. An insightful analysis is provided on the unintended consequences of different regulatory approaches, with observations on four key topics: anti-money laundering (AML) and know your customer (KYC) compliance, the function of regulatory and technical sandboxes, the implications of decentralized finance (DeFi), and the prioritization of privacy and security.

Notable findings include the European Union’s ambitious Markets in Crypto-Assets (MiCA) regulation aimed at harmonization across member states but criticized for its exclusion of certain asset types. In Gibraltar and Hong Kong, regulatory sandboxes serve as innovative testing grounds, allowing businesses to pilot products under regulatory supervision, thus encouraging a collaborative ecosystem. In the United States, a fragmented regulatory landscape raises concerns of regulatory arbitrage and uncertainty, prompting states like Wyoming to enact progressive legislation to attract digital asset firms. Recommendations provided in the report urge for technological solutions to enhance compliance, robust international collaboration on AML/KYC practices, and the establishment of clear parameters for regulating DeFi. The report concludes by advocating for ongoing public-private dialogue to create adaptable and effective regulatory frameworks essential for the rapidly evolving digital asset industry.

MiCA, EU’s Comprehensive New Crypto Regulation, Explained

The article discusses the European Union’s new Markets in Crypto Assets (MiCA) regulation, which is set to take effect in December 2024, marking the EU as the first major jurisdiction to create a comprehensive legal framework for cryptocurrencies. With various stakeholders applauding its aim to provide legal certainty and enhanced compliance in an industry previously characterized by ambiguity, MiCA’s introduction seeks to stabilize the crypto market, increase investor protection, and attract more businesses to the EU.

Key Highlights:

The MiCA regulation encompasses approximately 150 pages of rules that adapt existing EU financial laws to the unique needs of the crypto sector, allowing for a tailored approach rather than imposing traditional securities regulations. Companies offering crypto services will need authorization from national financial regulators and will be required to publish clear, risk-aware white papers before engaging in public offerings. Additionally, significant attention is given to the regulation of stablecoins, with strict governance requirements and transaction limits aimed at preventing any potential disruption to the euro and the broader economy.

While the regulation is generally welcomed by the crypto industry, potential compliance challenges are noted, with penalties for noncompliance reaching up to 12.5% of annual turnover. Nevertheless, licensed firms will benefit from a “passport” allowing them to operate across the EU’s 27 member states. The article also highlights ongoing controversies and open questions regarding MiCA, including its impact on environmental disclosures and its potential effect on decentralized finance initiatives. Furthermore, the global ramifications of MiCA are emphasized, as it could influence regulatory frameworks beyond the EU, prompting other jurisdictions to consider similar measures. Overall, the MiCA regulation represents a significant shift in the crypto landscape, aiming to provide stability while nurturing innovation in the market.