FATF Warns of Stablecoins’ Role in Illicit Transactions

The Financial Action Task Force (FATF) has issued a warning about the increasing use of stablecoins in illicit transactions, urging stronger regulatory measures for their issuers. According to a report citing Chainalysis data, stablecoins were involved in 84% of illicit virtual asset transactions in 2025, amounting to $154 billion. The report highlights that sanctions-related activities, particularly by countries like Iran and North Korea, are a significant concern, with stablecoins being used for financing weapons of mass destruction and sanctioned payments.

The FATF emphasizes the vulnerability of peer-to-peer transfers via non-custodial wallets, which can circumvent anti-money laundering controls. The organization recommends that countries impose anti-money laundering obligations on stablecoin issuers, potentially requiring wallet freezing capabilities and restricting certain smart contract functionalities. The current market capitalization of stablecoins stands at over $300 billion, underscoring the urgency of addressing these regulatory challenges.