Targeted Report on Regulatory Challenges from Decentralised Finance

Paris, 21 July 2026 - This report updates and complements the FATF’s previous analysis of Decentralised Finance (DeFi), as set out in the FATF's 2021 Updated Guidance for a Risk-Based Approach to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs), in light of the sector’s substantial expansion and evolution since the publication of that guidance. This targeted report should be read alongside the FATF’s broader guidance and work on VAs available on the FATF website and in Annex A.

While still a relatively small share of the broader VA market, DeFi's growth, combined with increasing participation by institutional investors, VASPs, and other regulated entities, has heightened its relevance within the global financial system and its potential exposure to money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risks.

The report highlights that effective implementation of the FATF Standards in the context of DeFi requires a functional and risk-based approach. A number of recommendations are made to help jurisdictions regulate and supervise DeFi arrangements, including to determine the existence of control. Recommendations are also made to DeFi arrangements, as well as Financial Institutions/VASPs interacting with them, to mitigate the risk of criminal abuse.