AML Regulation

Definition ∞ AML Regulation refers to the rules and guidelines established by governmental bodies to prevent money laundering and terrorist financing within financial systems. These regulations mandate that financial institutions, including those dealing with digital assets, implement measures to identify their customers, monitor transactions, and report suspicious activities. Adherence to these standards is critical for maintaining the legitimacy and integrity of financial operations in the digital asset space.
Context ∞ The current discourse surrounding AML Regulation in the cryptocurrency sector centers on the harmonization of global standards and the effective application of Know Your Customer (KYC) principles to decentralized finance (DeFi) protocols. Regulators are increasingly scrutinizing virtual asset service providers (VASPs) to ensure compliance, leading to debates about the technological feasibility and privacy implications of stringent enforcement. Future developments will likely involve enhanced cross-border cooperation and the adaptation of existing frameworks to novel blockchain technologies.