FATF's Travel Rule Adopted by 73% of Jurisdictions for Crypto Regulation

The Financial Action Task Force (FATF) has been instrumental in aligning cryptocurrency regulations with global standards, with 73% of eligible jurisdictions having implemented the FATF's Travel Rule. This rule mandates that crypto service providers collect and share users' transaction data, similar to traditional financial requirements. The FATF's annual report, released on June 26, highlights how recent regulatory moves by various jurisdictions are converging with its global Anti-Money Laundering (AML) framework. This convergence is a result of a years-long campaign by the FATF to bring cryptocurrencies in line with traditional AML and Counter-Terrorist Financing (CFT) standards.

The FATF has spotlighted stablecoins and decentralized finance (DeFi) for the second consecutive year, emphasizing their rising use in illicit finance, including by North Korean actors. The organization plans to release targeted papers on stablecoins, offshore crypto platforms, and DeFi by next summer, hinting at the next regulatory crackdown. The FATF's AML/CFT priorities are treated as a checklist by regulators to avoid isolation. The FATF’s Travel Rule was extended to cover cryptocurrencies and exchanges in 2019 as part of the organization’s standards on AML/CFT. It was added to Recommendation 15 (R.15) — one of FATF’s 40 recommendations — as an interpretive note.

Out of 138 jurisdictions, only one has achieved full compliance with R.15 by 2025. Meanwhile, 40 jurisdictions were assessed as “largely compliant,” up from 32 in 2024. Three jurisdictions were removed from the noncompliance category. Compliance means a jurisdiction has enacted laws requiring the licensing or registration of virtual asset service providers (VASPs) — such as cryptocurrency exchanges and trading platforms — or has identified the legal persons conducting VASP-related activities. The licensing requirements across jurisdictions are “very similar,” including in regions vying to be labeled as “crypto hubs.”

Regulators are also deadline fighters. So, they will make last-minute announcements (probably knowing the FATF draft of the report by that point) to see how they can improve their position before the formal report comes out. As a result, many jurisdictions have accelerated efforts to tighten controls, improve risk assessments, and enforce the FATF Travel Rule. The FATF’s June 2025 report reflects this urgency, showing that while progress has been made, significant gaps remain in risk assessment, licensing, and enforcement.

An increasing number of jurisdictions have now decided how they want to regulate their respective crypto sectors, with 82% of 163 respondents stating they’ve identified their preferred regulatory approach. There are two main directions jurisdictions can take: to permit or to prohibit, with prohibitions ranging from partial to blanket bans. Prohibition is becoming more common among Middle East and North Africa Financial Action Task Force and Eastern and Southern Africa Anti-Money Laundering Group members. However, the FATF warns that jurisdictions should consider this approach carefully, as full prohibition can be resource-intensive and difficult to enforce.

When jurisdictions choose to prohibit rather than regulate, they do not eliminate the presence of crypto within their borders. Instead, they relinquish oversight, enforcement leverage, and visibility into illicit flows. Let’s be real, crypto is borderless. China, an FATF member, has partially prohibited cryptocurrency-related activities, such as transactions and mining. But the decentralized nature of blockchain technology still makes cryptocurrencies largely accessible to the public. Although Beijing has banned Bitcoin (BTC) mining, Chinese mining pools continue to control the majority of the network’s hashrate.

Stablecoins and DeFi got their own sections in FATF’s report for the second consecutive year in the latest update. Stablecoins, in particular, have been among the biggest stories in crypto in 2025 so far, with major jurisdictions advancing legislative proposals for stablecoin licensing. But stablecoins have also been increasingly tied to illicit activities, including reliance by North Korean actors suspected of financing the state’s weapons program. Despite growing regulatory attention, most jurisdictions are still struggling to apply FATF standards to DeFi. According to the FATF’s 2025 report, nearly half of the jurisdictions that have implemented or are working on the Travel Rule say that some DeFi platforms should be licensed as VASPs, but most haven’t identified any such entities in practice.

The FATF’s influence is embedded within the United Nations framework, with multiple UN Security Council resolutions urging member states to implement FATF standards. This means jurisdictions face strong, concrete incentives to align their laws with FATF’s evolving standards, not merely out of goodwill but to avoid severe consequences. Gray listing serves as a powerful enforcement tool for FATF, as it places a jurisdiction under increased monitoring, resulting in economic and reputational consequences. While FATF does not make the law, you would be foolish to ignore it. When FATF speaks, regulators around the world listen. That’s how it’s always worked. If your country doesn’t align with those standards, it doesn’t just risk a poor rating — it risks becoming isolated.

The FATF’s statements, including its annual updates on crypto, offer a preview of where global regulations are headed. With stablecoins and DeFi emerging as key areas of concern in 2025, the FATF’s planned research into these sectors is expected to shape the next wave of compliance measures.