DeFi Platforms Considered VASPs Under New FATF Recommendations On Crypto

The Financial Action Task Force, which is an international advisory body, published an updated version of its recommendations for crypto regulations in October this year.

Under the new recommendations that legislative bodies are likely to follow in the future developers or maintainers of DeFi platforms are considered Virtual Asset Service Providers under the following conditions:

“Creators, owners and operators or some other persons who maintain control or sufficient influence in the DeFi arrangements, even if those arrangements seem decentralized, may fall under the FATF definition of a VASP where they are providing or actively facilitating VASP services.”

VASPs are mandated to enforce KYC and all the rest of the nasty burdensome shit that comes with being a fully regulated entity. The worst problem with compliance is that it is a wet blanket that heavily favors established entities like Wall Street by drowing all the small operators in red tape - and thus making the rich even richer and robbing Average Joe of any chance to avoid the blood sucking gatekeepers. It doesn't even work as intended. Legacy financial institutions keep getting caught laundering billions left and right while getting a rap on the knuckles for it.

What this means is that all pretenses of decentralization while being actually centralized must be dropped while embracing full decentralization in the future. It is absolutely necessary to revamp the current model of development and release of DeFi applications where a company or any single entity does the bulk of development work from early on and de facto controls the protocol.

DeFi is going to have to be the work of anonymous developers and the development of protocols must rely on a DAO or a be the work of volunteers. There must be a DAO not controlled by any single prominent entity but a large number of independent entities and the DAO must be in charge of rewarding individual developers for updating the code.

Reference: https://cointelegraph.com/news/fatf-includes-defi-in-guidance-for-crypto-service-providers

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