Cryptoasset exchanges are intermediaries which facilitates the exchange of cryptoassets and fiat currencies and cryptoassets with other cryptoassets. Over the years, there has been controversy around the obligations that should be applied on crypto exchanges and the due diligence they must conduct on users. With cryptoassets such as Bitcoin gaining a reputation for being used for illicit activity, pressure was put on exchanges to tighten up these processes.
The Financial Action Task Force (FATF), the lead representative for the global standards on anti-money laundering/combating terrorism financing (AML/CTF), explicitly clarified that its recommendations also applied to cryptoasset exchanges and that they should be brought within the remit of supervision like traditional exchanges. This therefore classifies cryptoasset exchanges as obliged entities, meaning they will have to comply with AML/CTF checks (see more in the AML section).