Each plays a unique role in guiding crypto markets toward safe, compliant growth.
FATF’s Focus: Tackling Unregistered Foreign Crypto Players
The Financial Action Task Force (FATF) — the world’s top intergovernmental body combating money laundering and terrorist financing — released its sixth targeted review on global crypto regulation. The findings sounded a clear warning: unregistered foreign crypto players remain a systemic risk to global financial integrity.
FATF’s Sixth Targeted Review
The FATF report found that many jurisdictions still face major challenges in identifying the natural persons or entities behind offshore crypto activities. Despite several policy advances, enforcement remains patchy, and transparency is lagging.
Travel Rule Implementation: Mixed Global Progress
The FATF’s Crypto Travel Rule — introduced in 2019 — requires Virtual Asset Service Providers (VASPs) such as exchanges and custodians to identify and share transaction data for transfers above a specified threshold. The intent is to ensure traceability and prevent illicit financial flows.
However, according to FATF’s latest findings:
73% of jurisdictions have enacted Travel Rule legislation.
Only 35 of 85 jurisdictions have begun formal enforcement.
FATF emphasized that laws without enforcement fail to deter illicit behavior.
To aid countries, FATF released “Best Practices in Travel Rule Supervision”, offering operational guidance to make the framework more effective in practice.
India’s Strategy to Address Offshore Non-Compliance
India provides a valuable example of the active enforcement of regulation, demonstrating how government authorities can obtain control over the crypto marketplace that continues to be increasingly globalized.
In March 2023, the Government of India made a significant move in this arena by formally labeling crypto service providers as reporting entities under the Prevention of Money Laundering Act (PMLA). This designation mandated all exchanges—regardless of whether they were established in India or not—to register with its Financial Intelligence Unit (FIU-India) as a reporting entity and therefore all exchanges would be required to live up to the same standards for transparency and reporting required for financial institutions.
The domestic exchanges quickly complied with the new requirement, although the foreign exchanges resisted, arguing either that indefensible jurisdictional issues arose or operational impediments arose that made compliance with Indian law impossible. India’s response was decisive. By December 2023, more than one offshore exchange had received notices from the Ministry of Finance of compliance issues, and ultimately, notices were issued to 19 non-compliant exchanges blocking such entities from further access to Indian citizens and being in violation of the Indian AML provisions.
The country continued its strong stance, when FIU-India sent another round of non-compliance notices to 25 offshore crypto players, including:
These actions underline India’s zero-tolerance approach to regulatory evasion. However, as the FATF’s latest review highlights, this is not a challenge unique to India. Around the world, many offshore crypto players tend to comply only after enforcement pressure, revealing a systemic issue in global compliance culture.
India’s experience demonstrates that strong, enforceable frameworks combined with decisive action are essential to protect national interests, ensure financial integrity, and establish accountability within the global crypto ecosystem.
The Perils of Offshore Exchanges
Unregistered or foreign crypto platforms operating without local oversight present multiple dangers:
Financial Risk: Users lack legal recourse if funds are lost or stolen.
National Security Threat: Potential misuse for laundering, sanctions evasion, or terror financing.
Economic Risk: Drains liquidity from domestic markets, undermining compliant players.
Many countries — including the U.S., Japan, South Korea, and India — are taking steps to:
Mandate local registration for all foreign exchanges.
Impose higher taxes or penalties for unregulated players.
Block access to non-compliant platforms.
Pursue criminal or financial sanctions against repeat offenders.
The FATF’s findings confirm that strong enforcement — not just regulation — is vital to protect both citizens and the integrity of global markets.
Regional Approaches to Crypto Oversight
Different regions adopt varied strategies based on economic goals and regulatory maturity.
North America
U.S.: Regulatory fragmentation between SEC, CFTC, and FinCEN; ongoing disputes over token classification.
Canada: Mandates registration of exchanges with the Canadian Securities Administrators (CSA) and enforces AML compliance.
Europe
EU: The MiCA Regulation (2024) introduced a uniform crypto licensing regime.
UK: Overseen by the Financial Conduct Authority (FCA), focusing on consumer protection and AML registration.
Asia-Pacific
Japan: One of the first countries to legalize and regulate crypto under the Payment Services Act.
Singapore: Oversees crypto firms under the Payment Services Act with robust AML/KYC requirements.
India: Implements AML enforcement via FIU-India; yet to finalize comprehensive legislation.
Middle East
UAE (Dubai VARA): Developing specialized frameworks for virtual assets.
Saudi Arabia: Taking a measured approach through pilot projects.
Latin America
Brazil: Legalized crypto payments; regulated exchanges under central bank oversight.
Argentina: Exploring taxation and consumer safeguards for crypto traders.
This regulatory mosaic reinforces the need for global harmonization.
Challenges in Regulating a Borderless Market
The crypto landscape poses inherent challenges to regulators worldwide.
Key Obstacles
Jurisdictional Ambiguity: Difficult to define legal responsibility across borders.
Inconsistent Definitions: “Security” vs. “commodity” classifications differ globally.
Data Privacy Dilemmas: Balancing KYC requirements with privacy rights.
Rapid Innovation: Technology often outpaces regulation.
Unregistered Offshore Entities: Persistent non-compliance despite global efforts.
