Virtual Assets

The term is FATF's wide label for items such as cryptocurrencies, many stablecoins and other tokens that exist on a ledger and can move without a bank. Its width is deliberate, so that new products do not escape the rules because they fit no existing label. Features that worry financial crime specialists include fast cross-border movement, the use of pseudonymous addresses, mixing services and the ease of moving value in and out of regulated channels. At the same time, public blockchains keep a permanent record that investigators can trace, which many crime-fighting teams find useful. Countries differ in how they classify tokens, and a token may count as a virtual asset in one place and a security in another. Digital central bank currency is generally treated separately. Whether a token counts decides whether the businesses dealing in it need a licence and customer checks.

A customer of a bank receives a large payment from an exchange and says it comes from selling tokens. The bank asks for the exchange's name, the trading history and the wallet addresses, and uses a tracing tool to confirm the funds did not pass through a mixing service. Satisfied, it records the source of funds and keeps normal monitoring.