Although many DeFi projects present themselves as fully decentralized, centralized elements "frequently persist in practice," the report found, through concentrated governance tokens, administrative privileges, control over upgrades, and the fees and rewards that flow to insiders.
FATF President Giles Thomson said in a statement accompanying the report that the goal is to stop criminals exploiting new technology to "launder dirty money" while "supporting responsible financial innovation," calling strong public-private information sharing central to the response.
Decentralized in name only?The report lays out on-chain and off-chain signs of control, including upgrade keys and "kill switch" functions, the power to set fees or risk parameters, concentrated voting power, command of the public website or app, and the corporate entities that employ core developers or hold the treasury. Where such control exists, FATF said, the people behind it, whether developers, large token holders, front-end operators or funders, should be licensed and supervised like any financial firm. Even running a front-end that funnels users to a protocol can be enough to qualify.
A ban as a last resort North Korea's DeFi haulDeFi's total value locked reached $86.6 billion this year, up about 85% since 2023, with the top dozen protocols holding more than 60% of it, per the report, which calls for regulators to implement the FATF rulebook rather than leaving a gap that could enable illicit finance at scale.
