International finance watchdog warns stablecoins are increasingly used in sanctions evasion and money laundering

Policy Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email International finance watchdog warns stablecoins are increasingly used in sanctions evasion and money laundering In its latest report, the global standard setter FATF said stablecoins now account for the bulk of illicit crypto activity and pose growing risks through peer-to-peer transfers. By Olivier Acuna | Edited by Nikhilesh De Mar 3, 2026, 5:55 p.m. Make us preferred on Google FATF calls for greater oversight on stablecoins. (Photo by CoinWire Japan on Unsplash/Modified by CoinDesk) What to know : The Financial Action Task Force warned that stablecoins are now the most widely used virtual asset in illicit transactions, including by actors in Iran and North Korea, and called for stricter oversight of issuers. Recent analyses by FATF, Chainalysis and TRM Labs found that stablecoins accounted for the vast majority of illicit crypto transaction volume in 2024 and 2025, with tens of billions of dollars tied to fraud, scams and sanctions evasion. FATF urged countries to impose anti-money laundering rules on stablecoin issuers, address risks from peer-to-peer transfers via unhosted wallets, and consider tools such as wallet freezing and restrictions on certain smart-contract functions as the market surpasses $300 billion. The Financial Action Task Force (FATF) said that “stablecoins are the most popular virtual asset used in illicit transactions,” including Iran and North Korea, and therefore calling for stricter oversight of stablecoin issuers in a 42-page report published Tuesday . In January 2026, the global watchdog said it found stablecoins accounted for most illicit onchain activity. It estimated there was approximately $51 billion in illicit stablecoin activity relating to fraud and scams in 2024. In its March 2026 report, the task force again warned dollar-pegged tokens have become a key vehicle for illicit finance. It cited a Chainalysis report that said stablecoins accounted for 84% of the $154 billion in illicit virtual asset transaction volume in 2025. The report highlighted cases involving North Korean and Iranian actors using stablecoins such as USDT for proliferation financing and cross-border payments tied to sanctioned activity. TRM Labs released a report mid-February saying that in 2025, illicit entities received $141 billion in stablecoins, the highest level observed in five years. The report noted that overall stablecoin activity exceeded $1 trillion per month on several occasions last year. Sanctions-related activity accounted for 86% of illicit crypto flows, the report said, with bad actors mostly relying on stablecoin platforms. The FATF said peer-to-peer transfers via unhosted wallets present a “key vulnerability” because these types of transactions can occur without anti-money laundering controls. While stopping short of calling for blanket blacklisting, the FATF urged countries to impose anti-money laundering (AML) obligations on stablecoin issuers and consider requiring tools such as wallet freezing and banning or restricting functions embedded in smart contracts. With stablecoins now exceeding $300 billion in market value, FATF warned regulators must act quickly to close compliance gaps as adoption accelerates. FATF Stablecoins Iran More For You Pudgy Penguins: Challenging the Pokemon and Disney Legacy in the Global IP Race By CoinDesk Research Feb 27, 2026 Commissioned by Pudgy Penguins CoinDesk Research looks into how Pudgy Penguins disrupts traditional toys market via a phygital model. With 2M+ units sold, they scale via global partnerships and events. 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