This is not a small footnote. It signals a foundational shift: the LEI is no longer a nice-to-have — it’s now embedded in the global AML compliance architecture. For Virtual Asset Service Providers (VASPs), the message is clear: entity-level identification is expected to meet the same transparency standards as traditional financial institutions.

MiCA and CARF: Dual Pressures from Europe and the OECD

The EU’s Markets in Crypto-Assets Regulation (MiCA), now in its implementation phase, formally integrates LEIs into the compliance obligations of Crypto-Asset Service Providers (CASPs). The regulation mandates LEI usage in cross-border fund transfers and reporting, aligning digital asset firms with traditional financial institutions in terms of transparency and traceability.

Simultaneously, the OECD’s Crypto-Asset Reporting Framework (CARF) is building a global standard for tax reporting on crypto transactions. This framework mirrors the Common Reporting Standard (CRS) used for financial accounts, and strongly implies that LEIs will play a central role in identifying institutional crypto actors across jurisdictions.

In practice, this means that even if LEI inclusion is not yet fully enforced under CARF, regulatory direction is unmistakable: the LEI will be instrumental in ensuring tax transparency and cross-border data alignment.

What’s Driving This Momentum?

The push for LEIs in crypto is driven by tangible, operational needs:

• Precise Entity Identification: Unlike names or wallet addresses, the LEI is unique and global, eliminating ambiguity across jurisdictions.

• Improved Compliance Efficiency: Regulated firms can more easily validate counterparties and reduce duplicate checks in AML and KYC processes.

• Trust and Access: Offshore and unregulated players seeking access to correspondent banking networks must demonstrate credibility. LEIs support this.

Moreover, frameworks like ISO 20022, increasingly used in cross-border payments and financial messaging, are natively compatible with LEI integration, enhancing interoperability between traditional and digital financial infrastructure.

What About DeFi and Decentralised Structures?

Of course, one challenge remains: how to apply LEIs in a decentralised context. Many DeFi protocols do not have a legal entity or centralised operator. However, this is precisely where the verifiable LEI (vLEI) could come into play, allowing credentialed, real-time identity even in semi-decentralised environments and real time verification of Natural Persons tied to an entity. 

Regulators are unlikely to exempt DeFi entirely. We may see a rise in hybrid models — where the interface with the traditional financial system (e.g., fiat onramps or front-end services) becomes the regulated touchpoint requiring LEIs.

The Road Ahead

Global regulators are converging around a simple principle: if a crypto platform touches real money, real people, and real economic value — then clear, standardised identity is non-negotiable.

We expect more jurisdictions to mandate LEIs in their crypto licensing frameworks in the coming 12–24 months. The FATF, EU, and OECD have already set the tone. The SEC, CFTC, and MAS may soon follow.

The inclusion of the LEI in FATF’s Recommendation 16 is more than symbolic. It cements the LEI as part of crypto’s regulatory DNA. For VASPs and CASPs, proactive integration of LEIs into KYC and compliance workflows is no longer just good practice — it's fast becoming a regulatory necessity.

As digital finance grows up, the LEI is proving to be the global standard for identity.