By Hans Doringo
In a recently released updates to the Financial Action Task Force’s (FATF) guidance for virtual assets and virtual asset service providers (VASPs), the body clarified that Non-Fungible Tokens (NFT) does not fit the definition for virtual assets (VA) but would still be covered by FATF standards under certain cases.
What is the FATF’s Position on NFTs?
Last March 2021, FATF published a draft of the guidance addressing concerns about NFT as its market grows. In the said draft, it was vaguely stated that NFTs can be considered VAs if they “enable the transfer or exchange of value.”
According to the guidance, NFTs don’t appear to constitute VAs since they need to have a tradeable or exchangeable component before it could be considered as a virtual asset.
Furthermore, the definition states that VAs should contain transferrable values instead of just being a mode of record keeping.
The latest draft that was published last October 28, 2021, however, clarifies that NFTs are not generally VAs but may fall under the said category “if they are to be used for payment or investment purposes in practice.” (Read More: What is the FATF Guidance on DeFi?)
In cases where NFTs are used in such a way that falls under FATF standards, the body insists that it should still be regulated using a “functional approach.”
Meanwhile, NFTs that are made for digital representations of other financial assets are now already subject to existing FATF standards.
“Such assets are therefore excluded from the FATF definition of VA but would be covered by the FATF Standards as that type of financial asset,” said the guidance. (Read More: The FATF, Cryptocurrencies, and the Philippines)
Aside from NFT, the finalized guidance also talked about issues concerning the implementation of “travel rule” to decentralized finance (DeFi).
In addition, as stated on the updated version of the guidance, the FATF repeated its statement about the importance of interpreting definitions broadly so that it can be utilized to fight illicit finance activity.
This article is published on BitPinas: FATF Guidance: NFTs Should Be Regulated Case-by-Case