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The signing of the Mecca Joint Defence Agreement by Pakistan, Saudi Arabia and Türkiye on August 7 has opened a new and potentially consequential chapter in the security architecture of Asia and the Gulf. The agreement states that an armed attack against any one of the three countries will be regarded as an attack against all three, while envisaging deeper military coordination, joint exercises, intelligence cooperation and collaboration in areas including drones, electronic warfare, artificial intelligence and defence production. Türkiye has also indicated that the framework could eventually be expanded to other countries. What makes the development particularly significant is not simply the agreement itself, but the reaction from Washington. President Donald Trump has welcomed the pact as a “big, bold, important first step” towards regional countries being able to defend themselves more meaningfully. His words raise a larger strategic question, is the United States beginning to transfer a greater share of the burden of confronting Iran to regional powers, particularly the Gulf and Asian countries? Or making this region as its main combatant force against Iran? And what are the possible next steps? The answer is more complicated than a simple American withdrawal. Washington is unlikely to abandon the Middle East, its military assets, intelligence networks, diplomatic influence or relationships with Gulf states. What appears to be changing is the distribution of responsibility. The Trump administration’s broader philosophy of burden-sharing suggests that countries possessing substantial financial, military and strategic resources should assume greater responsibility for their own security rather than expecting Washington to carry the entire cost. In that sense, America may not be handing over the war against Iran, but it may be regionalising the consequences of that war. The distinction is crucial. A regionalised conflict can become much more dangerous because the number of actors involved increases. At the same time, regional ownership of security could eventually create a framework in which regional states themselves negotiate a new balance rather than remaining permanently dependent on an external power. The Pakistan-Saudi relationship provides the foundation for this transformation. The two countries signed their Strategic Mutual Defence Agreement in September 2025, committing themselves to collective security. The new Mecca agreement effectively brings Türkiye into a much broader strategic framework. Each country brings a different strategic asset. Saudi Arabia possesses enormous financial resources, energy influence and geographical importance. Türkiye brings one of the region’s most capable conventional militaries, a rapidly developing indigenous defence industry, drone technology and NATO experience. Pakistan brings a large and experienced military establishment and, uniquely among Muslim-majority states, a nuclear deterrent. The combination therefore has significance beyond its three signatories. It links the Gulf, South Asia and the eastern Mediterranean in a single security conversation. For Saudi Arabia, the agreement represents strategic insurance. Riyadh has increasingly understood that sophisticated American weapons alone cannot eliminate vulnerabilities created by missiles, drones, cyberwarfare and attacks on energy infrastructure. Diversifying its security relationships allows Saudi Arabia to maintain its partnership with Washington while simultaneously developing alternative sources of military capability. For Türkiye, the pact fits into Ankara’s long-standing ambition to exercise greater strategic autonomy. Türkiye remains a NATO member, but it has increasingly demonstrated that it does not want its foreign policy to be dictated by any single great power. A defence relationship stretching from Türkiye through Saudi Arabia to Pakistan expands Ankara’s influence across two strategically vital regions. For Pakistan, however, the equation is much more delicate. Pakistan has the opportunity to emerge as an important security bridge between South Asia and the Gulf, but it also has a geographical reality that cannot be ignored, it shares a border with Iran. Islamabad cannot afford to treat Tehran simply as an enemy without exposing itself to enormous security, economic and diplomatic risks. Pakistan therefore faces the most difficult balancing act of the three. Its relationship with Saudi Arabia is strategically important. Its relationship with Türkiye is deepening. Its partnership with China remains fundamental. Its relationship with the United States is economically and strategically significant. Yet Iran is its immediate western neighbour, with which it shares a long border and important diplomatic and economic interests. This makes Pakistan potentially more valuable as a mediator than as a frontline combatant. If Islamabad can defend Saudi Arabia while simultaneously maintaining communication with Tehran, it could acquire an extraordinary diplomatic role. Pakistan could become one of the few countries capable of speaking to the Gulf, Iran, Türkiye, China and Washington at the same time. That possibility is already visible in Pakistan’s efforts to maintain diplomatic engagement with Iran while navigating its defence commitments to Saudi Arabia. The Iranian response will be critical. Although the three countries have described the agreement as defensive rather than an alliance directed against a particular state, Tehran will inevitably examine its military implications. A coordinated Saudi-Turkish-Pakistani security structure potentially means improved intelligence, air defence, military exercises, drone capabilities and defence-industrial cooperation around Iran’s strategic neighbourhood. But this could produce two very different outcomes. The first is escalation. Iran could interpret the emerging architecture as an attempt to encircle it and respond by strengthening its missile forces, regional partnerships and asymmetric capabilities. The Gulf could then become increasingly militarised, with every defensive measure interpreted by the other side as preparation for aggression. The second possibility is deterrence leading eventually to diplomacy. If Iran concludes that it cannot achieve regional dominance through military pressure, while Saudi Arabia and other Gulf states conclude that permanent dependence on American protection is neither sufficient nor sustainable, both sides may eventually have an incentive to negotiate a regional security arrangement. That would be the more constructive outcome. The danger, however, is that the emerging alliance could be interpreted through a sectarian lens. Saudi Arabia, Türkiye and Pakistan are all Sunni-majority states, while Iran is the region’s principal Shia power. If the new security architecture becomes identified as a Sunni military bloc confronting Shia Iran, it could revive precisely the sectarian competition that has destabilised the Middle East for decades. Pakistan should be particularly careful

By Saqlain Abid Tarrar The 60-day U.S.-Iran understanding expired on August 17 without the breakthrough Washington and Tehran had hoped—or claimed—to seek. The agreement has effectively stalled, the Strait of Hormuz remains at the centre of the confrontation, and both sides continue to blame the other for the diplomatic failure. Iran has now warned that it could shift towards a more offensive posture if diplomacy does not progress. This leaves a disturbing question on the table: is the nuclear option becoming the next neutralisation node in the Iran war? The question gained momentum after former Congresswoman Marjorie Taylor Greene claimed that the use of nuclear weapons had been discussed in Trump administration strategy meetings. Such a claim should be treated cautiously because there is no independent evidence that President Donald Trump has ordered or formally approved a nuclear strike. Nevertheless, the allegation itself demonstrates how far the strategic debate has moved. The White House has maintained that nuclear use is not a proposal on the table. Yet Trump’s own rhetoric has made the situation increasingly difficult to ignore. He has declared that the United States has “total control” of Hormuz and described the idea of making the strategically vital waterway U.S. territory as attractive. The Strait of Hormuz is not merely another battlefield. Around one-fifth of the world’s oil and gas supplies normally pass through this narrow maritime chokepoint. Any prolonged closure therefore creates consequences far beyond Iran and the United States: higher energy prices, disrupted shipping, inflationary pressure and another shock to an already fragile global economy. So, what are the chances of the United States actually using nuclear weapons? At present, they remain extremely low—but low is not the same as impossible. History demonstrates how quickly supposedly unthinkable options can become military realities. The United States became the first country to use nuclear weapons in warfare when it dropped atomic bombs on Hiroshima and Nagasaki in August 1945. However, it would be historically inaccurate to argue that those attacks were simply conducted to test plutonium and uranium against the Soviet Union. The motives remain debated, including compelling Japanese surrender and influencing the emerging post-war balance with Moscow. The lesson, nevertheless, is unmistakable: once a state believes that an extraordinary weapon can achieve an extraordinary political objective, the threshold can become dangerously negotiable. That is why today’s situation deserves scrutiny. The Trump administration needs an exit from a war that has become increasingly difficult to convert into a decisive political settlement. The USS Abraham Lincoln has also endured an exceptionally long deployment, reportedly more than 240 days at sea, adding another layer of military and political pressure. But nuclear weapons would not provide a rational solution to that problem. Iran’s nuclear capability is certainly a serious concern. The IAEA reported that Iran had accumulated about 440.9 kilograms of uranium enriched to 60 percent before the 2025 attacks disrupted international verification. That material could theoretically produce significant quantities of weapons-grade material if further enriched, but possession of 60-percent enriched uranium does not mean Iran already possesses nuclear weapons. Iran, meanwhile, has suffered severe economic and infrastructural damage, yet its resistance has not disappeared. Tehran continues to signal that it will not simply surrender under pressure. The danger is therefore that military escalation creates the very nuclear insecurity Washington says it wants to prevent. Russia and China could condemn any nuclear use and mobilise diplomatic opposition. The United Nations could debate emergency resolutions. European governments could strongly object. But none of these actors could physically intercept an American warhead once Washington had made the decision. That makes the most important restraint internal: the political and strategic judgment of the American leadership itself. And there is an even larger regional consequence. If Iran were struck with nuclear weapons, Gulf states could reach a frightening conclusion: conventional alliances may no longer provide sufficient security. Saudi Arabia, the UAE, Türkiye and others could reconsider their long-term strategic options. Nuclear hedging and proliferation could become increasingly attractive. That would transform the Middle East permanently. The irony would be profound. An American nuclear strike intended to prevent Iran from becoming a nuclear power could encourage an entire region to seek nuclear deterrence. Hormuz may eventually be reopened through negotiations, military pressure or a new regional security arrangement. But once the nuclear taboo is broken, restoring it would be far more difficult. The nuclear option should therefore remain the last option—not because it is weak, but because its consequences are stronger than any victory it could deliver. Power can neutralise an opponent. But when power is unleashed without restraint, it can ultimately neutralise the international order itself.

By Ali Hiader A certain segment in Pakistan has been gaining momentum in arguing that had dictator General Pervez Musharraf—like Imran Khan—said “Absolutely Not” to Washington, Pakistan might have been spared the scourge of terrorism and the subsequent economic hardships. However, such an argument attempts to view the decision made in 2001 through the lens of circumstances that emerged years later. The terrorist attacks of September 11, 2001, shook the United States and sent shockwaves through the global order; approximately 3,000 people lost their lives, and institutions regarded globally as symbols of American economic and military might were targeted. These attacks challenged the security of the world’s sole superpower and generated intense public pressure on the President George W. Bush’s administration to take retaliatory action. For the United States, inaction had become politically almost impossible. Responsibility for these attacks was attributed to Al-Qaeda and its leader, Osama bin Laden—a Saudi national who was living in Afghanistan under Taliban protection. Initially, Bin Laden denied responsibility for the attacks, but his later statements increasingly portrayed as a retaliatory response to American policies. Regardless of how these statements were interpreted politically, by the end of 2001, it was clear to Washington that Al-Qaeda was the primary enemy and that Afghanistan was the hub of its operations. This context holds particular significance for Pakistan because the Taliban government was harboring Osama bin Laden. Pakistan was not merely a distant spectator to this crisis; it shared a long border with Afghanistan and had spent two decades during the Cold War establishing an extensive political and intelligence network there. Consequently, the United States had no better option than Pakistan. Therefore, the fundamental question is: Did Pakistan truly have the option to simply say “absolutely not,” instead of joining the American war? Pakistan was already grappling with severe economic and diplomatic vulnerabilities during the post-9/11 crisis, as the United States and other Western nations had imposed harsh economic sanctions following the 1998 nuclear tests. These sanctions slowed the pace of development, hampered foreign investment, and strained relations with global financial institutions, leaving the country already burdened by heavy debt. The situation became further complicated when General Pervez Musharraf seized power in October 1999, overthrowing an elected government. The military coup added fuel to the fire, further damaging Pakistan’s global reputation and leaving the country diplomatically weakened at a time when it needed international support the most. Following the September 11 attacks, Washington made its expectations absolutely clear. According to Musharraf’s own account, US Deputy Secretary of State Richard Armitage delivered a stern message to Pakistan: it had to stand either with the United States or against it. Another remark widely attributed to the US position was that if Pakistan refused to cooperate, it could be sent “back to the Stone Age.” Although the exact wording of that phrase was never officially substantiated, the intensity of US pressure was undeniable. Did the United States have the capability to inflict devastating damage on Pakistan, despite Pakistan being a nuclear power? The answer to this is “yes.” Pakistan’s nuclear capability was primarily developed to deter India. Pakistan’s nuclear arsenal provided Islamabad with a strategic deterrent against its key regional rival, but this did not mean Pakistan was immune to American economic, diplomatic, or technological pressure. Pakistan lacked the long-range military capabilities to directly strike the U.S. mainland—located 7,000 miles away—whereas the United States held an overwhelming advantage in air power, naval strength, intelligence, technology, financial resources, and global diplomatic influence. Therefore, nuclear weapons were not synonymous with strategic parity with the United States. Pakistan could deter certain types of aggression from India, but realistically, it lacked the capability to inflict the same level of damage upon the United States. Another major reason for Pakistan’s importance to the United States was the intelligence network present in Afghanistan. During the Cold War, Pakistan was one of the United States’ key regional partners in supporting the Afghan resistance against the Soviet occupation. Pakistani intelligence agencies established extensive networks among Afghan groups, while the United States and Saudi Arabia provided arms and financial support for the resistance. Pakistan served as a crucial conduit for channeling this aid to the Afghan resistance. This historical relationship gave the United States a unique strategic advantage after 9/11. Pakistan possessed a combination of geography, intelligence networks, logistical routes, and institutional experience—assets that would have been extremely difficult to replace. Its cooperation could significantly facilitate U.S. operations in Afghanistan. Consequently, Islamabad chose the path it deemed relatively less damaging. Pakistan provided assistance through logistical support, access to airspace and facilities, intelligence cooperation, and other means, but did not directly join the war; in return for this strategic support, US sanctions were eased, economic aid increased, and Pakistan regained special diplomatic significance in Washington. This does not mean that the decision was without negative consequences. Pakistan itself became a major target of terrorism, resulting in the deaths of nearly 70,000 civilian and military personnels and economic losses of approximately $150 billion; Pakistan paid a very heavy price for this war. Furthermore, the repercussions of the strategic policies adopted during the 1980s and 1990s later manifested as problems for Pakistan—issues that perhaps could not have been fully foreseen in 2001. However, there is an important distinction here: criticizing the consequences of a decision and claiming that a different realistic course of action existed at the time are two separate things. A major irony of the Afghan war is that U.S. officials and analysts have repeatedly cited Pakistan as one of the primary reason for the failure to achieve American objectives in Afghanistan. When the question arises as to why the world’s most powerful military failed to achieve its objectives in Afghanistan, the answer is sometimes given in a single word: Pakistan. This should not necessarily be viewed as a badge of honor; rather, it reflects a complex relationship in which Washington needed Pakistan yet lacked trust in it, while simultaneously accusing certain Pakistani elements of supporting forces that were undermining

Pakistan has entered a crucial phase in its constitutional and administrative journey. With a population exceeding 250 million, the governance model that served the country decades ago is increasingly being questioned. Recent public discussions, including remarks by Interior Minister Mohsin Naqvi advocating a debate on administrative reforms in light of Pakistan’s growing population, have reignited an important national conversation: Is it time to rethink how Pakistan is governed? In my view, the answer is yes. The real challenge is not simply whether Pakistan should create more provinces. The real challenge is how governance can be brought closer to the people. A modern state cannot be effectively administered through excessive centralization when its population, economy, and urban centers have expanded dramatically over the past several decades. The first and most important reform should be the empowerment of local governments. District administrations, metropolitan authorities, and municipal governments should be given genuine constitutional authority, financial autonomy, and administrative independence. Citizens interact with government primarily through local institutions. Therefore, healthcare, education, sanitation, water supply, transport, municipal planning, and public safety should be managed by empowered local governments rather than through an overly centralized administrative structure. Karachi represents the strongest example of why governance reform has become a necessity rather than a choice. As Pakistan’s largest city and economic engine, Karachi deserves a governance model specifically designed for a modern global megacity. Despite its enormous contribution to the national economy, the city continues to face serious challenges in urban planning, infrastructure, traffic management, public transport, water supply, waste management, and municipal administration. In my opinion, simply placing Karachi under direct federal control would not automatically solve these problems. The federal government already carries enormous national responsibilities, and transferring administrative authority without structural reforms may simply relocate existing governance challenges. Instead, Karachi requires a metropolitan governance model comparable to internationally recognized cities such as New York, where professional city administration, clearly defined institutional responsibilities, strong municipal leadership, effective policing coordination, urban planning, and financial autonomy work together under a comprehensive metropolitan framework. Such a model could improve service delivery while ensuring greater accountability and long-term planning. Governance reform should not stop at strengthening local governments. Pakistan should also seriously consider creating additional provinces wherever there is genuine administrative need, broad public consultation, and constitutional consensus. Smaller provinces can improve administrative efficiency, strengthen regional representation, and make governments more responsive to local communities. More representative provincial structures can also help ensure that the concerns of both urban and rural populations receive greater attention at the national level. Equally important is the devolution of administrative authority to districts and local institutions. Excessive concentration of political and administrative power often limits opportunities for ordinary citizens to influence decisions that directly affect their lives. A stronger local government system would enable communities to participate more effectively in governance while improving transparency, accountability, and public service delivery. This debate should never be viewed as an attempt to weaken Sindh or divide its people. On the contrary, I believe these reforms would strengthen Sindh by ensuring that development and decision-making reach every corner of the province. Whether someone lives in Kandhkot, Larkana, Mithi, Islamkot, Mirpurkhas, Badin, Hyderabad, Thatta, or Karachi, every citizen deserves equal access to quality healthcare, education, infrastructure, clean drinking water, municipal services, and economic opportunities. An equally important aspect of this reform process is public awareness and civic education. Pakistan needs a network of credible academics, constitutional experts, economists, retired civil servants, educationists, and respected members of civil society who can engage directly with communities across Sindh, particularly in rural and underserved areas where access to balanced political information may be limited. Their role should be to explain, in Sindhi and other local languages, the constitutional, administrative, and economic implications of decentralization, stronger local governments, and, where appropriate, the creation of additional provinces. Many citizens hear conflicting political narratives about these proposals. In my view, people should be encouraged to evaluate reforms on the basis of evidence, administrative efficiency, and public welfare rather than fear or political rhetoric. If these reforms genuinely improve representation, accountability, and service delivery, they should be supported regardless of political interests. Ultimately, the objective should not be to benefit any political party but to empower every citizen and ensure that governance serves the people instead of entrenched centers of power. Unfortunately, discussions about administrative reform are often overshadowed by political narratives that generate fear and misunderstanding. In my opinion, governance reforms should be evaluated on their administrative merits rather than through the lens of partisan politics. Citizens should be encouraged to examine whether decentralisation would improve their quality of life instead of viewing every proposal as a political contest. Meaningful reform also requires strengthening independent institutions, ensuring merit-based appointments, improving accountability, and modernising public administration. Whether Pakistan ultimately retains its parliamentary system or chooses another constitutional framework, lasting success will depend upon transparent institutions, professional governance, and effective local administration. Pakistan’s future does not depend merely on drawing new boundaries on a map. It depends upon building a governance system that places citizens—not bureaucracy or political centralization, at the center of public administration. Strong local governments, empowered districts, efficient metropolitan administrations, and, where constitutionally appropriate, additional provinces can together create a stronger federation, a more prosperous Sindh, and a better future for every Pakistani. A prosperous Pakistan will be built not through the concentration of power, but through the fair and effective distribution of power to the people.

South Korea is one of the most remarkable countries in the world. Shortly after the mid-20th century, South Korea was one of the poorest countries in the world. According to World Bank, it had a per-capita gross domestic product (GDP) of roughly 159 USD in 1960. The Helen Kellogg Institute For International Studies (University of Notre Dame) points out that South Korea’s per-capita income in early 1960 was lower than Haiti, Ethiopia and Yemen and over 40% of the South Korea’s population was suffering from absolute poverty. However, with right public policy actions implemented in the right direction, South Korea was among the most rapidly growing economies in the world by the start of 21st century. Do you know that South Korea had exponentially increased its per-capita GDP to 12,710 USD (in 2000) that then sky-rocketed to over USD 36000 in 2025? A question that one would ask is, what formed the basis of this rapid economic growth and a resulting reduction in poverty in South Korea? A World Bank report “Republic of Korea: Four decades of equitable growth” points out that South Korea has experienced rapid economic growth in 1990, where its real GDP grew by over 5 percent each year except 1998. Absolute poverty decreased incredibly in South Korea during 1975 – 2001. Those who remained poor were either had low educational achievements or were unemployed or underemployed. In 1975, South Korea earned USD 12.4 billion through trade that then skyrocketed to a trade volume of USD 314.6 billion in 2002. Thus, in a span of 27 years, trade volume of South Korea increased over 25 times which is nothing less than a remarkable success story. A journey that helped South Korea to achieve rags-to-riches status in 3 decades time. In my opinion, education made a significant difference in South Korean society and made it more socially resilient to meet the challenges of today and tomorrow. As we all know that with education and the use of common sense, we make better life choices that then helps us is attaining better results for us and our families. Do you know that South Korean society is one of the most educated societies in the world? As per Organization for Economic Co-operation and Development (OECD), over 58% of masses in South Korea has tertiary education. In-fact, South Korea performed better than Luxembourg, Australia, Norway, Netherlands and several other countries when it comes to percentage of masses (25 – 64 years) who have completed tertiary education in 2025. Highly educated masses mean highly qualified labour that can help any country in commencing sustainable social and economic development over a sustained period. We all are familiar with Samsung Electronics and the leading role it plays in connecting countries and people across the globe. Do you know that Samsung Electronics is a South Korean company? In 2025, Samsung Electronics declared a revenue worth a whooping USD 233.3 billion. Similarly, Hyundai Motor Co., Ltd is another South Korean motor vehicles and parts manufacturing company. According to Forbes, in 2025, Hyundai Motor Co., Ltd declared a financial revenue worth a whooping USD 128.4 billion including a profit of USD 9.1 billion. Hyundai Motor Company pointed out that it sold over 4 million vehicles worldwide out of which close to a million vehicles were electrified vehicles. Likewise, Kia Corporation is South Korea’s oldest motor vehicles manufacturing company and has a capacity to produce over 1.4 million vehicles each year. Kia Corporation has over 40,000 employees and normally reports an annual revenue of over USD 17 billion each year.  LG Electronics is another South Korean tech giant that reported a revenue of USD 62 billion in 2025. Finally, SK Hynix Inc is another South Korean company that manufactures semiconductor products and had reported an annual revenue of USD 51.2 billion in 2025 with profits over USD 18 billion. It is crucial to mention here that SK Hynix Inc is among the largest memory chip manufacturer’s in the world and acts as a rival to Samsung. Moreover, it is an important memory supplier to Apple and the components supplied by SK Hynix Inc are widely used in iPhone, iPad and MacBooks. Carnegie Endowment for International Peace reports that South Korea’s gross domestic product (GDP) was USD 1.71 trillion in 2023 and its per-capita GDP was USD 33,121. Do you know that in 2020, South Korea invested USD 112.9 billion on domestic research and development (R&D). Globally, it stood on fifth position when it comes to spending on R&D. Top spending on R&D in 2020 was commenced by United States with USD 720.9 billion, followed by China with USD 582.8 billion, Japan with USD 174.1 billion and Germany with USD 143.4 billion. Despite commencing rapid social and economic development, South Korea has not compromised on environmental conservation. According to The Korea Times newspaper, South Korea planted roughly 10 billion trees from 1960 to 1980. As a direct result of this, Korea Forest Service (KFS) reported that South Korea’s forest growth rate exponentially increased from 50 cubic meters per hectare in 1990 to 148 cubic meters per hectare in 2015. Thus, in a span of 25 years, forests in South Korea observed nearly 3 times increase in growth rate. It serves as an excellent example that we can commence economic growth, eradicate absolute poverty and conserve environment simultaneously. The already discussed example shatters the paradigm that we must compromise and degrade environment to commence economic growth. A successful reforestation program in South Korea proves the fact that we can commence economic growth and protect environment simultaneously. Do you know that trees are the most inexpensive carbon capture and storage devices? Moreover, healthy forests help us to decrease the concentration of carbon dioxide gas in atmosphere, mitigate climate change, prevent biodiversity loss, avoid landslides and provide clean air and water by decreasing pollution. We must understand this basic fact that for our commenced economic growth to be sustainable, we must preserve and protect environment. In-fact, Sustainable Development has 3 pillars

The development of decentralized finance represents a material reconfiguration of financial intermediation rather than a peripheral experiment in virtual assets. DeFi enables trading, lending, borrowing, liquidity provision and asset management through blockchain based smart contracts, with continuous availability, programmable execution, global accessibility and reduced dependence on conventional intermediaries. The FATF records total value locked at USD 86.644 billion in 2026, approximately 85 percent above the 2023 level, while institutional investors, virtual asset service providers and regulated entities are increasingly committing capital to DeFi arrangements. This track suggests that DeFi will not simply compete with traditional finance, but will progressively intersect with it through tokenized assets, settlement, payments, liquidity and market infrastructure. The policy significance of that convergence lies in the need to preserve innovation without permitting functional substitutes for regulated finance to escape equivalent safeguards. Traditional finance provides legal accountability, prudential discipline, customer identification and institutional channels for enforcement, while DeFi contributes automation, composability, transparency of public ledger transactions, broader access and rapid settlement. The future architecture is therefore likely to be hybrid: regulated institutions will use decentralized infrastructure where it produces efficiency, whereas supervisors will require comparable financial integrity outcomes whenever equivalent financial functions are performed. FATF, the Financial Stability Board, IOSCO and the IMF converge on a technology neutral and function oriented conception under which substance, activity, control and risk prevail over labels or technological form. The July 2026 FATF Targeted Report is consequently best understood as an implementation instrument that updates the 2021 Guidance in light of DeFi’s expansion. Its scope is to identify emerging money laundering, terrorist financing and proliferation financing risks, clarify when the FATF Standards apply. It also provide practical tools for identification, regulation, supervision and investigation, develop criteria for identifying controllers or persons exercising sufficient influence, and recommend measures for public and private actors. The report is expressly non-binding, but its analytical significance is substantial because it translates Recommendation 15 into a functional supervisory methodology for a market whose legal form, governance and territorial nexus are frequently indeterminate. The defining characteristics of DeFi create both utility and vulnerability. Similarly, smart contract automation removes many conventional execution functions, open source and composable architecture permit rapid replication and interaction among protocols, algorithmic market mechanisms automate liquidity, pricing and liquidation, pseudonymous liquidity provision permits participation without conventional identification, permissionless access may eliminate customer due diligence, and reliance on oracles imports external data into automated decisions. These characteristics permit rapid and complex movement of value but also allow illicit proceeds to be layered through liquidity pools, decentralized exchanges, bridges, swaps and multiple chains before supervisory or enforcement systems can react. The regulatory fragmentation, weak compliance, cyber vulnerabilities and diminishing dependence upon regulated entry and exit points further aggravate supervisory difficulty. The applicable legal framework begins with technological neutrality. The recommendation 15 applies where a natural or legal person, as a business, conducts or actively facilitates activities falling within the VASP definition. The software itself is not regulated merely because it executes a financial function, but persons exercising control or sufficient influence over a DeFi arrangement may fall within the regulatory perimeter. FATF differentiates centralized arrangements with identifiable controllers, centralized arrangements in which control exists but controllers are difficult to identify, and truly decentralized arrangements in which no person maintains control or sufficient influence. The first two categories fall within the Standards, the third falls outside direct application, although it remains subject to alternative risk mitigation through adjacent regulated actors. The principal implementation deficit is therefore institutional rather than conceptual. FATF’s 2026 survey found that only 26 of 142 responding jurisdictions had assessed DeFi risks, 132 had not identified qualifying DeFi arrangements operating in their territory, only four had implemented licensing or registration requirements, and only two had licensed or registered such arrangements. The resulting supervisory gap facilitates regulatory arbitrage and demonstrates why national authorities must integrate DeFi into national, sectoral or virtual asset risk assessments, calibrated to materiality, domestic exposure, cross border activity, governance structures and actual financial crime threats. The financial crime typologies identified by FATF demonstrate that DeFi risk is not confined to speculative misconduct. The fraudsters have used purported DeFi structures to misrepresent liquidity and divert investor assets, professional money laundering networks fragment funds across wallets and then use decentralized exchanges, bridges, mixers, swaps and chain hopping to obscure provenance, ransomware groups and hackers use DeFi immediately after compromise to convert and disperse proceeds, and proliferation financing actors have exploited governance weaknesses, oracles, bridges and limited compliance environments. The policy concern is intensified by speed: automated movement can complete layering before authorities, intermediaries or analytics providers can identify the event, establish attribution and initiate restraint. The decisive supervisory question is the identification of control or sufficient influence. FATF treats control as the practical ability to determine or materially influence key operations, service delivery or economic benefits. The relevant indicators include authority to modify or pause smart contracts, alter protocol parameters, control oracles, administer treasury assets, determine participation, appoint key actors, receive material fee flows, control governance votes, operate public interfaces, manage corporate entities, determine development priorities, control essential infrastructure, or direct branding and communications. No single indicator is conclusive. Additionally, authorities should combine public blockchain evidence, governance records, audits, service provider information, financial intelligence and investigative material, and should assess economic reality rather than formal claims of decentralization. The assessment of control must remain continuous because governance can migrate from a company or foundation to a decentralized autonomous organization without relinquishing substantive authority. The concentrated governance tokens, delegated voting blocs, special proposal rights, veto powers, administrative keys, clustered wallets and continuing receipt of protocol revenues may disclose retained control. On the contrary, a genuinely decentralized arrangement, after independent assessment, falls outside direct FATF obligations because no accountable person can be identified. That conclusion does not equate to absence of risk. The authorities should instead influence stablecoin issuers, regulated VASPs, financial institutions and controlled application interfaces, whereas encouraging digital identity, embedded customer due diligence and blockchain analytics within genuinely decentralized environments. The licensing and