FATF urges Morocco to strengthen oversight of crypto-related activities

Morocco’s ban on cryptocurrencies may no longer be sufficient on its own to shield the financial system from the risks associated with virtual assets. International standards increasingly require countries not only to restrict unauthorized activity but also to demonstrate that they can identify, investigate and prosecute illegal services operating outside the formal financial system.

The issue features prominently in the latest update from the Financial Action Task Force (FATF), which examines how jurisdictions are implementing international standards governing virtual assets and virtual asset service providers (VASPs). The assessment comes as a growing number of countries move away from outright prohibition toward licensing and risk-based supervision.

Based on a survey conducted between February and June 2026, FATF reported that 86% of participating jurisdictions had carried out assessments of the risks associated with virtual assets. Morocco was among the countries that reported having completed such an assessment.

For FATF, however, identifying risks is only the starting point. Authorities are expected to translate those assessments into effective supervisory and enforcement measures. This creates a particular challenge for Morocco, which has opted to prohibit virtual-asset activity rather than establish a licensing and supervisory framework for the sector.

Morocco’s approach places it among a growing group of jurisdictions that have adopted explicit prohibitions. According to the FATF assessment, the share of jurisdictions following this approach rose to 23% in 2026, compared with 11% in 2023, with the policy particularly visible across the Middle East and North Africa.

FATF nevertheless stresses that a prohibition, while compatible in principle with its standards, does not remove the authorities’ responsibility to address illegal activity that may continue despite the ban.

The cross-border nature of digital assets makes enforcement particularly difficult. Users can access foreign platforms, transfer assets directly between one another and rely on unhosted wallets that are not connected to regulated financial intermediaries.

As a result, closing the door to formal crypto services does not necessarily eliminate the underlying market. Instead, some transactions may migrate toward channels that are considerably more difficult for conventional supervisory systems to detect and monitor.

Peer-to-peer transactions involving unhosted wallets are among the areas receiving particular attention from FATF. Some 88% of jurisdictions surveyed classified such activity as high risk, reflecting concerns over the absence of a regulated intermediary responsible for applying anti-money-laundering and counter-terrorist-financing requirements and reporting suspicious transactions.

The challenge is particularly significant for countries that prohibit virtual asset service providers altogether, since users may simply turn to foreign platforms or self-hosted wallets that fall outside domestic supervision.

FATF therefore warns that prohibition without effective enforcement mechanisms can leave vulnerabilities that criminal networks may exploit for money laundering and fraud. Digital assets can move funds rapidly across borders, making it harder for authorities to follow the trail through traditional financial channels.

The report highlights cases illustrating the scale of these challenges. One example involves a network of companies in Cambodia accused of laundering more than $4 billion between 2021 and 2025.

According to the findings, networks of this kind can use stablecoins, unhosted wallets and over-the-counter trading intermediaries to move funds between jurisdictions and obscure the origin and destination of illicit proceeds.

FATF also points to the importance of jurisdictions with weak or incomplete regulatory frameworks, where illicit flows may find easier entry points into the international financial system. Monitoring the links between traditional finance and the digital-asset economy is therefore becoming increasingly important.

For Morocco, this does not automatically mean that the country is a destination for such activities. It does, however, raise questions about the authorities’ ability to detect illegal transactions conducted through channels beyond the reach of the domestic financial system.

FATF’s assessment framework covers jurisdictions representing approximately 97% of the global virtual-asset market. Morocco appears within this framework based on the methodology used by the international watchdog and not necessarily because of the size of its domestic crypto market.

Morocco’s technical compliance rating also remains at “partially compliant” (PC), a classification that has remained unchanged since 2024.

This assessment does not mean FATF is calling on Morocco to legalize Bitcoin or formally authorize cryptocurrencies. Rather, the organization emphasizes that countries must understand the risks posed by virtual assets and take concrete measures to prevent and punish illegal activity.

Under FATF standards, jurisdictions that choose prohibition are still expected to develop a comprehensive understanding of the risks and establish mechanisms capable of identifying and sanctioning individuals or entities providing unauthorized virtual-asset services.

The data also show that only 16 of the 21 jurisdictions that reported an explicit ban on virtual-asset service providers said they had taken enforcement action. The figures highlight the uneven implementation of prohibition policies across jurisdictions.

In Morocco’s case, the FATF report does not provide detailed information on enforcement measures against unauthorized virtual-asset providers, leaving an important question over how effectively the existing prohibition is being implemented in practice.

An alternative approach is increasingly being explored internationally: allowing certain virtual-asset activities under strict regulatory supervision while continuing to prohibit their use as a means of payment.

Countries such as Indonesia and Türkiye have developed models that permit certain investment and trading activities while imposing restrictions on the use of crypto-assets for payments. Such frameworks seek to create a middle ground between a complete ban and unrestricted market liberalization.

For Morocco, any future move toward regulation could build on existing financial and supervisory institutions, including Bank Al-Maghrib and the Moroccan Capital Market Authority. However, regulation would require a comprehensive framework rather than simply issuing licenses to trading platforms.

Self-hosted wallets remain one of the most difficult elements for any prohibition-based policy. Authorities cannot easily prevent direct transfers between digital wallets that are not controlled by a centralized platform or regulated intermediary.

A more practical risk-management strategy would therefore focus on the points where the traditional financial system connects with the digital-asset economy. These include transactions converting Moroccan dirhams into virtual assets and vice versa, as well as stronger international cooperation to trace suspicious cross-border flows.

Another important element is the FATF “Travel Rule,” which requires virtual-asset service providers to transmit specific information about the parties involved in transactions. According to FATF, 83% of jurisdictions covered by the assessment have adopted legislation related to the rule, although implementation remains uneven.

For Morocco, the absence of locally registered virtual-asset service providers means the Travel Rule is not currently applicable in the same way it would be under a regulated market. Should the country eventually move toward formal regulation, however, compliance with the rule would become a central component of its supervisory framework.

Any transition from prohibition to regulation would also require stronger safeguards against money laundering, suspicious-transaction reporting, data-protection risks and international information-sharing. Supervisory and investigative authorities would need additional technical and human resources to track digital assets and understand increasingly sophisticated forms of cyber-enabled financial crime.

The risks extend beyond money laundering and fraud. FATF also identifies concerns related to terrorist financing, sanctions evasion and proliferation financing, reinforcing the need for authorities to maintain effective oversight of digital financial flows.

Ultimately, FATF is not placing Morocco under a single obligation to legalize cryptocurrencies. Instead, it presents a more complex requirement: if Morocco maintains its prohibition, it must demonstrate that the ban is supported by effective enforcement and that illegal activities continuing outside the formal system can still be identified and addressed.

The debate is therefore moving beyond the simple question of whether cryptocurrencies should be permitted or prohibited. The broader issue is whether governments can manage financial risks in a digital market that operates across borders and can move assets without relying on conventional banking infrastructure.

As Morocco approaches future mutual-evaluation rounds within the FATF-style regional framework of the Middle East and North Africa, its ability to provide concrete evidence of supervision, enforcement and international cooperation is likely to become increasingly important.

For Morocco, the regulatory challenge is consequently becoming harder to avoid. Maintaining a ban requires demonstrating that the prohibition works in practice, while a future regulatory model could give authorities greater visibility over the points where the traditional financial system meets the rapidly evolving world of virtual assets.