Global Encryption Regulatory Status: In-depth Interpretation of the Latest FATF Report

In June 2025, an important report on the regulation of encryption assets was released, attracting widespread attention from the industry. This report reveals the latest trends in global virtual asset regulation:

• Only one jurisdiction fully meets the regulatory standards
• About 20% of countries have not yet established an effective regulatory framework.
• North Korean hackers set a record by stealing $1.46 billion in encryption assets.
• Stablecoins have become a new tool for money laundering activities.
• The regulation of decentralized finance (DeFi) still faces many challenges.

The creators behind this report are the Financial Action Task Force (FATF). As an authoritative body in the global anti-money laundering and counter-terrorist financing fields, FATF's recommendations have a profound impact on the regulatory policies of countries.

FATF: The Creator of Global Anti-Money Laundering Standards

The FATF was established in 1989 and is composed of 39 member countries and regional organizations. Its recommendations on anti-money laundering are regarded as important guidelines in the global AML/CFT field.

For the encryption industry, the most critical is Recommendation 15 (R.15). This recommendation first included virtual assets and virtual asset service providers (VASP) in the regulatory framework in 2019, requiring VASP to fulfill compliance obligations such as customer due diligence and transaction monitoring.

The FATF converts its recommendations into rules that countries must adhere to through peer reviews and the "grey list" mechanism. Countries listed on the grey list may face severe consequences such as hindered international remittances and foreign capital withdrawal.

For encryption practitioners, understanding the FATF standards helps to anticipate global regulatory trends and to proactively establish a compliance system.

Six Key Findings of the FATF Report 2025

1. Global compliance is progressing slowly but steadily.

Among the 138 assessed jurisdictions:

• 1 fully compliant: Bahamas
• 29% Basic Compliance: USA, UK, Germany, Singapore, etc.
• 49% Partial Compliance: Hong Kong, Netherlands, Turkey, etc.
• 21% Non-compliant: Cambodia, Vietnam, etc.

2. Risk management remains a major challenge

76% of jurisdictions have conducted risk assessments on virtual assets, but they still face challenges in implementing preventive measures. Only 40 jurisdictions have met the standards for "assessing risks and adopting a risk-based approach."

3. Regulatory path divergence intensifies

• 62% allow virtual assets and VASP operations
• 20% completely prohibited related activities
• 18% regulatory direction not yet decided

Partial bans (rather than complete bans) are becoming a new trend.

4. Breakthrough progress has been made in the implementation of the Travel Rule.

73% of jurisdictions (85) have enacted legislation implementing the Travel Rule, requiring VASPs to obtain, retain, and transmit specific remitter and beneficiary information when transferring virtual assets.

5. Stablecoins become a new tool for money laundering

The report points out:

• Most on-chain illegal activities involve stablecoins
• Criminals use stablecoins in conjunction with anonymous tools for layering funds.
• USDT is particularly favored by illicit actors on the Tron network.

6. North Korean hackers set a new record

In 2025, North Korean hackers stole $1.46 billion worth of virtual assets from an encryption exchange, setting a record for the largest single theft in history. Ultimately, less than 4% of the stolen funds were recovered.

27 countries listed on the black and gray list

The FATF's gray and black lists have a significant impact on the global financial market.

Blacklisted countries:

• North Korea
• Iran
• Myanmar

Graylist Trend:

• The proportion of African countries is relatively high
• Encryption hotspot countries (such as Nigeria, Vietnam) have regulatory delays
• Offshore financial centers (such as the British Virgin Islands, Monaco) face challenges.

Regulatory Outlook for 2026

The FATF plans to release three important reports:

1. Stablecoin Special Report (Q1 2026) Pay attention to issues such as reserve transparency, de-pegging responsibility, and cross-chain regulation.

2. Offshore VASP Report (2025-2026) Discuss topics such as cross-border jurisdiction, data localization, and law enforcement cooperation.

3. DeFi Regulatory Guidelines (2025-2026) Focus on the identification of responsible entities, legal status of DAOs, audit of smart contracts, and other aspects.

Overall, global encryption regulation is transitioning from "barbaric growth" to "regulated development". Although currently only one jurisdiction has achieved full compliance, this also reflects the enormous development space and market opportunities in the encryption industry.