Crypto Regulation: Enforcement Lags Behind Legislation

The Financial Action Task Force (FATF) has reported that more jurisdictions are implementing the Travel Rule for virtual assets, but enforcement remains a challenge.

In its latest update, FATF found that 83% of surveyed countries have passed legislation to implement the Travel Rule, up from 73% in 2025. However, only 40% of these countries have taken supervisory or enforcement actions against non-compliant Virtual Asset Service Providers (VASPs).

The gap between rule-making and enforcement is now a major concern for FATF, as it creates pressure on the entire system by allowing illicit actors to exploit weaker jurisdictions.

The report highlights various risks tied to scam centers, DPRK cyber theft, Decentralized Finance (DeFi), unhosted wallets, and freeze-resistant stablecoins. It emphasizes that a rule without supervision or enforcement does not effectively prevent money laundering and terrorist financing activities.