The definitions of VAs and VASPs provided in the FATF’s updated guidance (FATF 2021, 109) are vital to understanding the impact of FATF Recommendations on crypto businesses and services. AML/CTF frameworks apply to certain crypto assets and services across the globe, and these definitions provide clarity on what does and does not apply.
The FATF notes that their provided definitions are to be interpreted broadly and expansively. FATF’s position is that no financial asset, regardless of the format in which it is offered, should be classified as falling outside FATF standards. (FATF 2021, p. 22, para. 46)
The novelty of decentralization, paired with the fast-paced evolution of the crypto space, has created ample opportunities for gray areas to inform the interpretation of these definitions.
How does the FATF define VAs?
A virtual asset is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. Virtual assets do not include digital representations of fiat currencies, securities, or other financial assets that are already covered elsewhere in the FATF Recommendations. (FATF. 2021b, p. 109)
How does the FATF define VASPs?
Virtual asset service provider means any natural or legal person who is not covered elsewhere under the Recommendations, and as a business conducts one or more of the following activities or operations for or on behalf of another natural or legal person:
exchange between virtual assets and fiat currencies;
exchange between one or more forms of virtual assets;
transfer of virtual assets;
safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets; and
participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset. (FATF. 2021b, p. 109)
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