Crypto Regulation Progresses Slowly as Enforcement Lags Behind

The Financial Action Task Force (FATF) has released its Seventh Targeted Update on the implementation of FATF standards for virtual assets and virtual asset service providers. According to the report, 83% of surveyed jurisdictions have passed legislation to implement the Travel Rule, a major shift from the early days when many countries were still deciding whether to regulate VASPs at all.

However, enforcement remains a weak point, with only 40% of jurisdictions with Travel Rule legislation having taken supervisory or enforcement actions. This gap is now the core issue, as crypto compliance has always had a weakest-link problem, where illicit actors can move through weaker jurisdictions and create pressure on the whole system.

The report flags organized crime-linked scam centers, DPRK cyber theft, unhosted wallets, DeFi, and stablecoins designed to resist freezing as areas of concern. The risk picture is changing, with a focus on large scam compounds, sophisticated cyber operations, decentralized services, wallet infrastructure, and stablecoin designs that limit issuers' or intermediaries' ability to freeze funds.