Cryptocurrency regulations are increasingly aligning with global standards; 73% of qualified jurisdictions have now enacted laws to implement the Financial Action Task Force (FATF) transfer rules.
The transfer rules require cryptocurrency service providers to collect and share user transaction data, similar to traditional financial requirements. On June 26, the FATF released its annual report outlining how recent regulatory initiatives across jurisdictions are converging with its global anti-money laundering (AML) framework.
This is a direct result of the FATF's years-long effort to bring cryptocurrencies in line with traditional AML and counter-terrorist financing (CFT) standards.
For the second consecutive year, the FATF has focused on stablecoins and decentralized finance (DeFi), emphasizing their increasing use in illicit finance, including by North Korean actors. The organization plans to release targeted documents on stablecoins, offshore cryptocurrency platforms, and DeFi next summer, hinting at the next steps in global cryptocurrency regulation.
The FATF's transfer rules were expanded in 2019 to cover cryptocurrencies and exchanges as part of the organization's AML/CFT standards. It was added to Recommendation 15 (R.15) — one of the FATF's 40 recommendations — as an interpretative note.
Among 138 jurisdictions, only one achieved full compliance with R.15 by 2025. Meanwhile, 40 jurisdictions were assessed as "largely compliant," up from 32 in 2024. Three jurisdictions were removed from the non-compliance category.
Compliance means that jurisdictions have enacted laws requiring licensing or registration for virtual asset service providers (VASP) — such as cryptocurrency exchanges and trading platforms — or have identified legal entities conducting VASP-related activities. Joshua Chu, co-chair of the Hong Kong Web3 Association, told Cointelegraph that licensing requirements across jurisdictions are "very similar," including in regions vying to be labeled as "cryptocurrency hubs," such as Singapore, Dubai, and Hong Kong.
The Monetary Authority of Singapore, the central bank of the city-state, recently warned cryptocurrency exchanges that engage in regulatory arbitrage by avoiding local licensing and relying solely on overseas clients. These exchanges were advised to either obtain a license or exit by the end of June.
This move has sparked debate about whether Singapore genuinely aims to become a digital asset powerhouse. Some industry insiders speculate that Hong Kong may benefit the most from its regional competitors' crackdown on unlicensed exchanges.
Chu warned that those seeking greener pastures in competing cryptocurrency hubs may ultimately be disappointed, as all places are adhering to the same FATF requirements. In fact, Singapore has issued more cryptocurrency licenses than Hong Kong.
"Regulators are also deadline warriors. So, they will issue announcements at the last minute (possibly already knowing the [FATF] report draft) to see how they can improve their standing before the formal report is released," Chu said.
Hong Kong is also accelerating the introduction of additional cryptocurrency rules. In May, its upcoming stablecoin regulations passed the Legislative Council. The region subsequently released an updated policy statement alongside the FATF report.
The FATF stated that an increasing number of jurisdictions have now decided how to regulate their respective cryptocurrency sectors, with 82% of 163 respondents indicating they have identified their preferred regulatory approach. Jurisdictions can take two main directions: allow or prohibit, with bans ranging from partial to complete.
In the Middle East and North Africa Financial Action Task Force and Eastern and Southern Africa Anti-Money Laundering Organization members, bans are becoming more common. However, the FATF warned that jurisdictions should carefully consider this approach, as comprehensive bans can be resource-intensive and difficult to enforce.
"When jurisdictions choose to ban rather than regulate, they do not eliminate the presence of cryptocurrencies within their borders. Instead, they forfeit oversight, enforcement leverage, and visibility into illicit flows of funds," Hedi Navazan, Chief Compliance Officer at 1inch Labs and Vice Chair of the Global Alliance for Financial Crime's Digital Assets Working Group, told Cointelegraph.
"To be honest, cryptocurrencies are borderless," she added.
FATF member country China has partially banned cryptocurrency-related activities, such as trading and mining. However, the decentralized nature of blockchain technology still allows cryptocurrencies to be largely accessible to the public. Despite Beijing's ban on Bitcoin (BTC) mining, Chinese mining pools continue to control a significant portion of the network's hash power.
In the latest update, stablecoins and DeFi have received their own chapters in the FATF report for the second consecutive year.
In particular, stablecoins have become one of the biggest stories in the cryptocurrency space in 2025, with major jurisdictions advancing legislative proposals for stablecoin licensing, including the U.S. GENIUS Act, which opens the door for tech companies to launch private stablecoins. The European Union is further advancing regulations through the Markets in Crypto-Assets (MiCA) framework, establishing rules for stablecoin issuers.
However, stablecoins are also increasingly associated with illicit activities, including reliance by North Korean actors suspected of funding the country's weapons program, with industry estimates indicating that 63% of illicit transaction volume is denominated in stablecoins.
"Stablecoins, particularly USDT on the Tron network, have essentially become the preferred tool for illicit actors. From North Korean hackers to scam networks… this is no longer just a niche issue," Navazan said.
Despite increasing regulatory scrutiny, most jurisdictions are still struggling to apply FATF standards to DeFi. According to the FATF's 2025 report, among jurisdictions that have implemented or are developing transfer rules, nearly half indicated that certain DeFi platforms should be licensed as VASPs, but most have not yet identified any such entities in practice.
Of the 47 jurisdictions claiming that DeFi may fall under VASP regulation, 75% have yet to find or license a single DeFi platform.
The FATF's influence is embedded within the United Nations framework, with multiple UN Security Council resolutions urging member states to implement FATF standards.
"This means jurisdictions face strong, specific incentives to align their laws with the FATF's evolving standards, not just out of goodwill, but to avoid serious consequences," Chu said.
The gray list serves as a powerful enforcement tool for the FATF, as it places jurisdictions under increased scrutiny, leading to economic and reputational consequences. The emerging cryptocurrency hub Dubai was previously on the gray list until the United Arab Emirates was removed in 2024.
"While the FATF does not make laws, ignoring it is foolish. When the FATF speaks, regulators around the world listen. It has always worked this way," Navazan said.
The FATF's statements, including its annual updates on cryptocurrencies, provide a preview of the global regulatory direction. With stablecoins and DeFi becoming key areas of focus in 2025, the FATF's planned research on these sectors is expected to shape the next wave of compliance measures.
Related: U.S. regulators consider streamlining the listing process for cryptocurrency ETFs
Original article: “FATF's Cryptocurrency Checklist Hints at Next Round of Regulatory Crackdown”
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