The IOTA Foundation has voiced its support for the Financial Action Task Force’s (FATF) proposed revisions to anti-money laundering (AML) and combating the financing of terrorism (CFT) standards. As a leading advocate for digital innovation and compliance, IOTA welcomes these updates as a step toward a more balanced regulatory framework that promotes financial inclusion while maintaining robust risk management.
A More Proportionate Approach to Risk-Based Regulation
One of the notable changes in FATF’s proposal is replacing the term “commensurate” with “proportionate” when discussing risk management measures. This seemingly minor revision carries significant implications, ensuring that financial institutions and virtual asset service providers (VASPs) adopt a risk-based approach suited to emerging technologies. By refining regulatory expectations, FATF fosters an environment where compliance does not stifle financial innovation.
Tackling Overcompliance with Practical Risk Mitigation
FATF’s updated stance on the supervisory review of risk mitigation strategies is another positive shift. It aims to reduce overcompliance by allowing financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) to tailor their compliance measures to actual risk levels. For instance, low-risk financial activities could benefit from simplified due diligence processes, streamlining operations while maintaining regulatory integrity.
Simplified Compliance for Financial Growth
The IOTA Foundation strongly supports FATF’s call for simplified compliance measures in lower-risk scenarios. These adjustments remove barriers to entry for startups and innovative financial services, encouraging competition and sectoral growth. A less burdensome regulatory landscape ensures that new business models can emerge without unnecessary constraints, fostering a dynamic financial ecosystem.
With financial services increasingly transitioning to digital platforms, FATF’s acknowledgment that non-face-to-face interactions are not inherently high-risk is a welcome move. Advancements in digital identity solutions have significantly strengthened remote transaction security. By recognizing these developments, FATF enhances financial accessibility while maintaining stringent AML/CFT safeguards.
Regulatory compliance in decentralized finance (DeFi) remains a key challenge. FATF’s approach to self-hosted wallets and DeFi transactions should incorporate industry-specific solutions that balance compliance and privacy. The IOTA Foundation advocates for tokenized Know Your Customer (KYC) proofs, exemplified by its innovative KYC solution within the European Blockchain Regulatory Sandbox. This framework ensures scalable, secure, and privacy-preserving compliance, enabling responsible DeFi expansion.
Also Read: IOTA Rebased Mainnet Nears Launch As Ecosystem Gears Up for a New Era in Scalability and Adoption
The IOTA Foundation remains dedicated to shaping regulatory discussions that drive a secure and inclusive financial ecosystem. We encourage FATF and industry stakeholders to engage with us at legal@iota.org to explore these regulatory advancements further.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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