FATF Says Stablecoins Are Now Criminals' Favorite Stable Income 🪙

The Financial Action Task Force warned Thursday that stablecoins have become the dominant onchain vehicle for illicit finance, with most identified criminal activity in the crypto space now involving dollar-pegged tokens. In its latest annual review, the global anti-money laundering watchdog said criminal networks are also developing proprietary stablecoins engineered to resist freezing and asset seizures.

The Paris-based FATF urged jurisdictions to accelerate implementation of crypto-specific AML standards, arguing that regulatory gaps continue to be exploited by illicit actors. The report noted that 83% of surveyed jurisdictions have adopted the Travel Rule into law, up from 73% a year earlier, though many have yet to translate those legal frameworks into effective supervision and enforcement on the ground.

The FATF Travel Rule requires financial institutions and virtual asset service providers to exchange sender and receiver information for cross-border payments and crypto transactions above a baseline threshold of $1,000 or 1,000 euros. Compliance is intended to curb money laundering and terrorist financing, but the watchdog said implementation gaps persist across major and emerging markets alike.

The report also flagged continued difficulties in addressing offshore crypto service providers, many of which fall outside any single jurisdiction's regulatory reach. FATF further cautioned that decentralized finance, or DeFi, could emerge as a growing regulatory blind spot, given the difficulty of identifying responsible parties within protocols that operate without traditional intermediaries.

The findings were drawn from FATF's annual mutual evaluation and follow-up process, which grades countries on their adherence to global AML and counter-terrorist financing standards applied to virtual assets. The watchdog called on governments to move from legislation to active enforcement, including supervision of stablecoin issuers and onramps exposed to peer-to-peer and DeFi-facing services.