FATF warns of risks from stablecoin use in illicit transactions

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FATF urges stronger oversight

P2P transfers remain a weak link

The report focuses on transactions conducted through self-custody wallets. Such transfers occur directly between users without the involvement of virtual asset service providers (VASPs) or banks. As a result, some transactions take place outside standard monitoring systems.

By mid-2025, more than 250 stablecoins were in circulation, with a combined market capitalization exceeding $300 billion. Their price stability and high liquidity have made stablecoins a popular tool for settlements and cross-border transfers.

Blockchain analytics firm Chainalysis notes that stablecoins are now the most commonly used assets in illicit crypto transactions. In 2025, they accounted for about 84% of the volume of illegal virtual asset transactions. The total value of funds sent to illicit addresses reached at least $154 billion.

FATF also noted that such operations often involve unhosted wallets and complex transaction chains that make it harder to trace the origin of funds.

FATF calls for stronger regulation

The organization urges countries to recognize the specific risks associated with stablecoins and introduce regulations tailored to these assets. FATF also reminds jurisdictions to fully implement Recommendation 15 of its standards, which extends anti-money laundering and counter-terrorist financing requirements to the crypto sector.

The watchdog also calls for stronger technical capabilities among regulators. Priorities include expertise in blockchain analytics, monitoring of P2P transactions, and a deeper understanding of smart contract mechanisms.

Some recommendations are directed at stablecoin issuers. FATF suggests implementing risk management tools such as the ability to freeze or burn tokens, enhanced customer verification during redemptions, and restrictions on transactions involving high-risk addresses.

Why the report matters for the market

Despite rising absolute volumes of illicit transactions, their share of the broader crypto economy remains relatively small. According to Chainalysis, criminal activity accounts for less than 1% of all blockchain transactions.

At the same time, stablecoins continue to gain traction in global payments and crypto trading. Major issuers such as Tether and Circle are already integrating their tokens into payment systems and financial services, while some banks and fintech companies are exploring their use for cross-border settlements.

In this context, stronger regulatory oversight could shape the next phase of the market’s development. New requirements for issuers, exchanges, and infrastructure providers may improve transparency and accelerate the integration of stablecoins into the traditional financial system.

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