Regulation in any sector has always been given a positive review because of the rate at which it arrests malicious actors in such a sector. Asides from that, a real-life setting regulation would see people follow the law steadfastly. In the crypto sector, regulations have been able to help the sector in terms of bringing in people.
Most people have mentioned that if the sector were not regulated, they would have never entered the space. A new update has seen the Financial Action Task Force roll out a new set of rules and regulations. With the anti-money laundering watchdog rolling out the regulations, it has got many tongues wagging due to the proposed effects that it would have.
The FATF regulation would recognize owners of DeFi platforms as VASP
According to analysts, should the new regulation be adopted, it might put paid to the booming parts of the crypto sector, the decentralized finance sector, and the Non-Fungible Token sector. In the regulation, the FATF said that it has chosen to recognize various protocols in the DeFi sector as virtual assets provide.
This means that should the law be adopted across the United States, the owners of various DeFi platforms would have to find ways to conform to the FATF rules and regulations. Even though this sounds like something that can be easily done, it is never as easy as it seems to the DeFi sector. The DeFi sector is known as a peer-to-peer flow of money design that mainly uses smart contracts to move money.
Most of the sector’s protocols are based mainly on Ethereum blockchain, with just some of them belonging to other blockchains. To summarize everything, the sector allows users to use bank services without the need for any financial institutions and other parties.
The regulation says NFT can be used for money laundering
The analysts have mentioned that if the laws in the pages of the rule book by the FATF were to be followed to the latter, it could deal the DeFi space a big blow. The document has also said that the NFT sector can be easily used for money laundering, referencing it on a page of its documents.
There might be an iota of truth in this because two parties can agree to buy and sell NFTs without the knowledge of authorities, exchanging ill-gotten gains in the process. The main bone of contention is identifying the various protocols that would fall under the new VASPs. This would depend largely on who holds the highest cash in the protocol.
An analyst has mentioned that with the rule, coders or developers cannot claim a protocol even though they built it. You will only be able to lay claim to a protocol if you ask a developer to build one for you and pay in cash, the analyst mentioned. In terms of governance tokens, the analysts mentioned that the FATF might recognize the person that holds the most token as the VASP of the protocol.