The Financial Action Task Force (FATF) has warned that stablecoins are becoming the preferred tool for crypto-related financial crime, urging countries to speed up enforcement of anti-money laundering (AML) rules for digital assets.
In its latest annual review released on Thursday, the global AML watchdog said most identified illicit onchain activity now involves dollar-pegged stablecoins rather than other cryptocurrencies. The agency also warned that criminal groups are developing their own stablecoins designed to avoid freezing and asset seizure by authorities.
The findings come as regulators continue to increase oversight of the digital asset sector while criminals adapt their methods to exploit gaps in enforcement.
Why are criminals turning to stablecoins?
According to the FATF, stablecoins have become more attractive for illicit transactions because of their speed, liquidity and widespread use across the crypto ecosystem. The watchdog said the increasing use of these assets by criminal networks marks a shift in how illicit funds are moved onchain.
The report also highlighted the trend of criminals creating proprietary stablecoins with features that make them more resistant to intervention by authorities. FATF said this development could make it harder for law enforcement agencies to freeze or recover stolen funds.
Meanwhile, Tether announced a strategic investment in Crystal Intelligence, a blockchain analytics firm specializing in advanced risk monitoring, fraud detection, and regulatory intelligence solutions to strengthen stablecoin crime detection as crypto scams surge.
ALSO READ: Are Stablecoins Becoming the New ‘Central Business Digital Currencies’?
AML rules are expanding, but enforcement still lags
The report comes from the FATF’s latest annual review of countries’ implementation of its AML standards for cryptocurrencies, which revealed that 83% of surveyed jurisdictions have now incorporated the FATF Travel Rule into their legal frameworks, up from 73% a year ago. However, the watchdog said many countries have not effectively enforced those requirements.
The Travel Rule requires financial institutions and virtual asset service providers (VASPs) to share information about the sender and recipient of cross-border crypto transactions above a set threshold, with FATF’s baseline set at $1,000 or €1,000. The measure is intended to improve transparency and reduce money laundering and terrorist financing risks.
What challenges remain for crypto regulators?
Beyond stablecoins, FATF said regulators continue to face difficulties supervising offshore crypto service providers that operate across multiple jurisdictions. The organization also warned that decentralized finance (DeFi) remains an area where many countries have yet to properly assess and address money laundering risks.
The watchdog urged jurisdictions to move beyond passing crypto regulations and focus on stronger supervision, consistent enforcement and international cooperation to close existing regulatory gaps that criminals continue to exploit.
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