CySEC publication- FATF Report on Stablecoins and Unhosted Wallets

We would like to inform you regarding the publication of Circular C762 issued by the Cyprus Securities and Exchange Commission (CySEC) concerning the Financial Action Task Force (FATF) report titled “Targeted Report on Stablecoins and Unhosted Wallets” (the “Report”).

CySEC draws attention to the FATF Report and reminds Regulated Entities that, in line with the FATF 2021 Updated Guidance on a Risk-Based Approach for Virtual Asset Service Providers (VASPs), they are expected to adequately identify, assess, and mitigate risks associated with the use of stablecoins and unhosted wallets.

CySEC further highlights the relevance of Regulation (EU) 2023/1113 on Transfer of Funds (TFR), as previously communicated to Regulated Entities via Circular C675.

 Regulated Entities are expected to:

  • take into account the FATF Report and consider the money laundering and terrorist financing risks associated with stablecoins and unhosted wallets;
  • enhance their understanding of the risks arising from transfers involving such instruments; and
  • apply a risk-based approach in line with the Prevention and Suppression of Money Laundering Activities Law (L.188(I)/2007), as amended.

Regulated Entities should ensure that their AML/CFT frameworks appropriately reflect the risks associated with:

  • stablecoin transactions; and
  • transfers involving unhosted wallets.

For further information or assistance, please do not hesitate to contact us.