Stablecoins’ Dirty Secret: 1 in 20 Transactions Funds High-Risk Crypto Crime, Says Bitrace Report

Stablecoins—the ’safe haven’ of crypto—just got a reality check. Bitrace’s latest forensic analysis reveals over 5% of transfers flow straight to illicit addresses, propping up everything from darknet markets to ransomware crews.

Follow the (tainted) money

The report exposes how criminals exploit stablecoins’ liquidity for money laundering—turning Tether into the de facto offshore bank for digital underworlds. No KYC, no problem.

Wall Street’s hypocrisy watch

Meanwhile, institutional investors keep preaching ’blockchain transparency’ while their stablecoin reserves indirectly fuel this shadow economy. Maybe audit those reserves again, guys?

Stablecoin addresses were also closely watched for links to exploits or scams. As most of the highly active USDT tokens are on Ethereum, they were especially suited to the habits of DPRK hackers, who typically quickly swap and launder ETH-based tokens. 

However, the TRON-based USDT also occupied a significant share of risky addresses. TRC-20 tokens were often used in P2P markets, some of which still conceal illegal operations or are used for laundering. 

Crypto hacks as a whole slowed down, but various forms of laundering accelerated in 2024. TRON was especially vigilant about its stablecoin supply, deploying the T3 Financial Crime Unit in partnership with Tether.

Bitrace tracks stablecoins to several illegal activities

Stablecoins Flow into several legally grey areas or outright illegal activities. The biggest share of flagged addresses belonged to grey or black markets. 

Fraud and online gambling were the new growth categories in 2024, surpassing the activity of 2023. Online gambling grew by 17.5% in the past year, for a share of $217B. While USDT was still the leading coin, USDC also grew its share of online gambling. 

A total of $86.3B in stablecoins flowed into various money laundering destinations. Part of the ability to launder funds was linked to the growth of Web3 facilities, including DEX, lending protocols, and privacy networks like ThorChain. The 2024 laundering trend extended into 2025, as hacking activity resumed. 

Even with a record supply of stablecoins, the share of those illegal activities remained relatively high as part of the overall turnover. In 2023, up to 5.49% of stablecoins went to dubious addresses, for a total of $574.4B. 

Bitrace’s estimate shows stablecoins are now more widely used for high-risk activities compared to the bull market of 2021 and 2022. Traders also shifted their selection of currencies, with TRC-20 USDT having the biggest share of grey-area activity. Ethereum-based USDC also increased its usage despite Circle’s attempts to position the stablecoin as fully regulated and transparent. 

Only a small fraction of those addresses have been exposed and frozen despite regular monitoring. Escrow platforms like Huione Guarantee are one of the key elements of laundering, expanding their volume to $2.64B in 2024. The increased activity of escrow services coincided with a spike of fraud activities. Personal fraud drew in $52.5B in stablecoin traffic for the whole of 2024, exceeding all yearly activity since 2021.

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