Stablecoins Dominate Illicit On-Chain Activity, FATF Reports

The Financial Action Task Force (FATF) has identified stablecoins as the primary vehicle for illicit on-chain activity, with an estimated $51 billion tied to fraud and scams in 2024. The watchdog warns that mass adoption of these assets could exacerbate money laundering and terrorist financing risks, especially amid inconsistent regulatory enforcement across jurisdictions.

Stablecoins have gained traction recently, buoyed by progress toward U.S. regulatory clarity. Their total market capitalization exceeded $250 billion for the first time this month. The FATF emphasized the critical role of "travel rule" compliance—a framework for sharing transaction originator and beneficiary data—in mitigating financial crime.

While 99 jurisdictions have enacted or are implementing the travel rule, challenges persist in identifying entities conducting virtual asset service provider (VASP) activities. Crypto AML firm Notabene anticipates near-universal compliance among cryptocurrency businesses as regulatory scrutiny intensifies.