The Financial Action Task Force (FATF) said in a report released Tuesday that its standards already apply to DeFi arrangements when identifiable persons retain “control or sufficient influence,” regardless of how decentralized a project claims to be. The report argues that many DeFi projects still show centralized features in practice, including concentrated governance tokens, admin rights, upgrade control, and fees or rewards flowing to insiders. FATF grouped DeFi into three categories: arrangements with identifiable controllers, systems that are effectively centralized while operators remain hidden, and genuinely leaderless structures. Only the last category, according to the report, would fall outside its standards. The report also said implementation remains limited across jurisdictions. Nearly 93% of responding jurisdictions have not applied the relevant standards to any qualifying DeFi arrangement. Out of 142 jurisdictions, only 26 had assessed the risks, four had licensing rules, and only two had ever registered or licensed related platforms. FATF also called on countries to require or encourage DeFi projects to embed anti-money laundering controls into smart contracts or user interfaces.
The Financial Action Task Force (FATF) said in a report released Tuesday that its rules already apply to DeFi arrangements if identifiable persons retain “control or sufficient influence,” regardless of how decentralized a project says it is.
FATF said many DeFi projects still show centralized features in practice. The report cited concentrated governance token holdings, administrative permissions, upgrade control, and fees and rewards that flow to insiders.
FATF splits DeFi into three groups
The report divides DeFi into three categories: arrangements with identifiable controllers, arrangements that are effectively centralized while operators remain hidden, and genuinely leaderless arrangements. According to FATF, only the last category would not fall under its standards.
Most jurisdictions have yet to apply the standards
FATF said nearly 93% of jurisdictions that responded to its survey have not applied the relevant standards to any qualifying DeFi arrangement. Among 142 jurisdictions, only 26 had assessed the risks, four had licensing rules, and just two had registered or licensed related platforms.
AML controls should be built into contracts or interfaces
FATF said countries should require or encourage DeFi projects to embed anti-money laundering controls into smart contracts or interfaces. For platforms that refuse to cooperate, jurisdictions could treat a ban on local operations as a last resort.
The report also said DeFi total value locked reached $86.6 billion this year, up about 85% from 2023.
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