FATF Greylisting Pushes Southeast Asia Towards Crypto Solutions
Last year, the Financial Action Task Force (FATF) “greylisted” Vietnam, which joined several other Southeast Asian economies in this tough position. Countries that are greylisted are flagged for having weak policies to monitor their anti-money laundering (AML) and counter-terrorism financing (CTF) measures. While greylisting isn’t as severe as blacklisting, it still has serious economic consequences. Payments to these countries can fall, and capital inflows may shrink, causing liquidity issues and making it harder for businesses to access the funds they need.
For instance, an analysis of SWIFT data indicates that greylisting can lead to a reduction of up to 10% in payments received by the listed country.
In response to this enterprise-threatening development, many of these nations are turning to cryptocurrencies and decentralized finance (<a rel="nofollow" class="glossaryLink" aria-describedby="tt" data-cmtooltip="
Whilst Bitcoin is ‘new money,’ Decentralized Fnance or DeFi is being seen as the next evolution in blockchain: ‘new financial services.’
In DeFi, there is no reliance on a central intermediary to hold funds. Instead, transactions occur directly between participants through automated, decentralized and democratized processes. This next wave of innovation in blockchain promises a faster, more inclusive, and transparent financial system that encompasses decentralized exchanges, lending, and trading platforms.
” href=”https://www.disruptionbanking.com/Fintech Glossary/defi/” data-gt-translate-attributes=”[{” attribute=”” tabindex=”0″ role=”link”DeFi) to make up for lost opportunities in the traditional financial system.
According to Chainalysis, crypto usage in Southeast Asia has enjoyed amazing growth in 2024, as both businesses and individuals look for more flexible, decentralized financial solutions. The region is emerging as a hub for crypto activity, with substantial inflows and high levels of activity on local exchanges and in <a rel="nofollow" class="glossaryLink" aria-describedby="tt" data-cmtooltip="
Whilst Bitcoin is ‘new money,’ Decentralized Fnance or DeFi is being seen as the next evolution in blockchain: ‘new financial services.’
In DeFi, there is no reliance on a central intermediary to hold funds. Instead, transactions occur directly between participants through automated, decentralized and democratized processes. This next wave of innovation in blockchain promises a faster, more inclusive, and transparent financial system that encompasses decentralized exchanges, lending, and trading platforms.
” href=”https://www.disruptionbanking.com/Fintech Glossary/defi/” data-gt-translate-attributes=”[{” attribute=”” tabindex=”0″ role=”link”DeFi, as Chainalysis data proves.
Countries like the Philippines, Vietnam, and South Africa are among those facing the challenges of FATF greylisting, grappling with economic and financial strain.
The Economic Impact of FATF Greylisting
The economic fallout from FATF greylisting is real and measurable. Countries on the list often see a significant drop in foreign direct investment (FDI) and a reduction in international payments. For instance, greylisted nations like the Philippines and Malaysia have experienced reduced foreign investment, hurting their economies.
A study by the International Monetary Fund (IMF) found that greylisting can lead to a drop in capital flows equal to 7.6% of a nation’s GDP. This decline typically occurs over a period of nine months following the greylisting, leaving them with fewer resources to stimulate economic growth. This has huge economic repercussions, especially for countries relying on foreign aid and investment.
Greylisting, to begin with, leads to economic isolation, as international businesses often shy away from engaging with greylisted countries due to increased compliance requirements and scrutiny. This drives up transaction costs and makes it a bit of an issue for businesses to maintain relationships with foreign partners.
Besides that, greylisted countries face the risk of credit rating downgrades, which can increase the cost of borrowing and further strain public finances. Additionally, local banks often need to put stricter anti-money laundering (AML) measures in place, which drive up costs for consumers and businesses alike.
Consequently, cryptocurrencies and decentralized finance (<a rel="nofollow" class="glossaryLink" aria-describedby="tt" data-cmtooltip="
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