The Financial Action Task Force (FATF) sets the global standards for combating money laundering and terrorism financing. As a founding member of FATF, Australia is committed to aligning its regulations with these international expectations. For crypto businesses, FATF’s standards are shaping both current compliance obligations and future licensing requirements. This article explains what FATF requires, how Australia currently measures up, and what crypto businesses operating in or entering the Australian market need to know.

What Is the FATF and Why It Matters

The FATF is an intergovernmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing, and the financing of weapons of mass destruction.

Its recommendations form the international benchmark for anti-money laundering (AML) and counter-terrorism financing (CTF) obligations. Countries that fail to comply with FATF standards risk being “grey-listed” or “blacklisted,” leading to:

• Increased cost of doing business internationally
• De-banking of local industries
• Loss of investor confidence
  
  

FATF’s Crypto Standards: The VASP Definition

In 2019, FATF amended its standards to apply to the crypto sector by introducing the concept of a Virtual Asset Service Provider (VASP). A VASP is any business conducting one or more of the following activities for or on behalf of another person:

1. Exchange between virtual assets and fiat currencies
2. Exchange between one or more forms of virtual assets
3. Transfer of virtual assets
4. Safekeeping or administration of virtual assets
5. Participation in and provision of financial services related to the issuance or sale of virtual assets
   
   

Where Australia Stands Today

Currently, Australia’s AML/CTF obligations apply only to the first activity: the exchange between crypto assets and fiat currency. These are the businesses known as Digital Currency Exchanges (DCEs), and they must register with AUSTRAC and comply with AML/CTF obligations.

However, Australia does not yet regulate:

• Crypto-to-crypto exchanges
• Wallet and custody providers
• Transfer and remittance services involving crypto
• Token issuance platforms and ICO service providers
  
  

This creates a regulatory gap between FATF standards and Australia’s current coverage.

AUSTRAC’s Recommendation: Expand the Regulatory Net

In its submission to Treasury, AUSTRAC supports adopting the full FATF VASP definition into Australian law. This would mean:

• All five VASP activities would be subject to AML/CTF regulation
• A new licensing regime would replace the current AUSTRAC registration system for DCEs
• Robust fit and proper person checks would be mandatory for all license applicants
  
  

The goal is to close existing gaps and bring Australia’s crypto regulation in line with global norms.

What This Means for Crypto Businesses in Australia

Crypto businesses operating in Australia or targeting Australian users should prepare for the following changes:

1. Expanded Licensing
   A future licensing regime will likely cover not just fiat-to-crypto exchanges, but also crypto-only platforms, custody providers, token issuers, and DeFi services with centralized governance.
   
   
2. AML/CTF Compliance Across the Board
   Any business providing a VASP service must:
   • Conduct customer due diligence (KYC)
   • Monitor transactions and report suspicious activity
   • Maintain robust internal compliance systems
     
     
3. Regulatory Clarity and Risk Management
   Businesses that comply with FATF-aligned standards are more likely to:
   • Retain access to banking services
   • Be seen as low-risk by financial institutions
   • Gain reputational benefits with customers and partners
     
     

Why This Is Urgent: The Risk of De-Banking

One of AUSTRAC’s core concerns is the de-banking of crypto businesses in Australia. If Australia’s regime remains inconsistent with FATF standards, global banks and payment processors may classify Australian crypto businesses as high-risk and refuse to serve them. This could force compliant businesses to the margins or drive them offshore.

The adoption of FATF standards is not just about regulation—it’s about enabling the crypto sector to operate within the broader financial system.

Conclusion

FATF standards are shaping the future of crypto regulation in Australia. For businesses in this space, compliance is no longer optional or isolated to fiat ramps. The broader application of AML/CTF obligations to all VASP activities is imminent. Now is the time to align internal policies, upgrade compliance systems, and prepare for licensing. Doing so not only ensures regulatory compliance but also strengthens market credibility and long-term viability in a globalised financial ecosystem.