Global financial regulatory body cautions that stablecoins are being increasingly utilized for circumventing sanctions and facilitating money laundering.

In its most recent report, the global regulatory body FATF indicated that stablecoins currently represent the majority of illegal cryptocurrency activities and present increasing risks through peer-to-peer transactions.

FATF calls for enhanced regulation on stablecoins. (Photo by CoinWire Japan on Unsplash/Modified by CoinDesk)

Key points:

• The Financial Action Task Force cautioned that stablecoins have become the most prevalent digital asset utilized in illegal transactions, particularly involving parties in Iran and North Korea, prompting a call for tighter regulation of issuers.
• Recent evaluations by FATF, Chainalysis, and TRM Labs revealed that stablecoins constituted the majority of illicit cryptocurrency transaction volume in 2024 and 2025, with tens of billions of dollars associated with fraud, scams, and evasion of sanctions.
• FATF urged nations to implement anti-money laundering regulations on stablecoin issuers, mitigate risks linked to peer-to-peer transfers via unhosted wallets, and contemplate measures such as wallet freezing and limitations on specific smart contract functionalities as the market surpasses $300 billion.

The Financial Action Task Force (FATF) stated that “stablecoins are the most favored digital asset employed in illicit transactions,” including those linked to Iran and North Korea, thus advocating for stricter oversight of stablecoin issuers in a 42-page report released on Tuesday.

In January 2026, the global watchdog reported that stablecoins represented the majority of illegal on-chain activities. It estimated that around $51 billion in illicit stablecoin transactions were connected to fraud and scams in 2024.

In its March 2026 report, the task force reiterated that dollar-pegged tokens have emerged as a primary means for illicit financing. It referenced a Chainalysis report indicating that stablecoins made up 84% of the $154 billion in illegal virtual asset transaction volume in 2025. The report underscored instances involving North Korean and Iranian actors utilizing stablecoins like USDT for financing proliferation and cross-border payments associated with sanctioned activities.

TRM Labs published a report in mid-February revealing that in 2025, illicit entities received $141 billion in stablecoins, the highest level recorded in five years. The report observed that overall stablecoin transactions exceeded $1 trillion monthly on multiple occasions last year. It noted that sanctions-related activities constituted 86% of illicit crypto flows, with malicious actors primarily relying on stablecoin platforms.

The FATF indicated that peer-to-peer transfers via unhosted wallets represent a “significant vulnerability” since these transactions can occur without anti-money laundering controls.

While refraining from advocating for universal blacklisting, the FATF urged countries to impose anti-money laundering (AML) obligations on stablecoin issuers and consider requiring tools such as wallet freezing and restricting or banning functions embedded within smart contracts.

As stablecoins now surpass $300 billion in market capitalization, FATF warned that regulators must act swiftly to address compliance gaps as adoption accelerates.