FATF Warns of Rising Stablecoin-Related Crime and Calls for Faster AML Enforcement

The Financial Action Task Force (FATF) has warned that organised crime groups continue to exploit regulatory weaknesses in the digital asset sector to move billions of dollars in illicit proceeds through crypto markets. The global watchdog highlighted that the use of stablecoins by criminal actors has increased over the past year, with some groups reportedly developing their own stablecoins designed to avoid freezing or seizure measures by authorities. Crypto-Related Crime Becomes More Complex and Connected FATF’s latest report shows that crypto-enabled crime has become increasingly sophisticated and interconnected, with digital assets being used in a wider range of illegal activities, including fraud, money laundering, sanctions evasion, and cybercrime. Regulators, financial institutions, and crypto companies continue to face significant challenges in identifying and preventing illicit financial flows, particularly those linked to scam networks and organised investment fraud schemes. While more countries have introduced regulatory frameworks for virtual assets, many are still struggling to turn these rules into effective supervision and enforcement, creating opportunities for criminal groups to exploit regulatory gaps. Global Progress in Crypto AML Regulation FATF’s seventh Targeted Update on the implementation of standards for virtual assets and virtual asset service providers (VASPs) highlighted continued progress in adopting anti-money laundering and counter-terrorist financing measures. The report found that 83% of surveyed jurisdictions have now introduced legislation implementing the Travel Rule, up from 73% in 2025, while additional countries are still working on adoption. The Travel Rule requires virtual asset service providers to share information about transaction senders and recipients, improving transparency and helping authorities track suspicious activity. Regulatory Gaps Remain a Challenge Despite progress, FATF noted that many jurisdictions continue to face difficulties identifying entities involved in virtual asset activities and ensuring effective oversight. The organisation highlighted ongoing risks related to offshore VASPs and decentralised finance (DeFi) platforms, which could become a growing challenge as traditional financial institutions and crypto companies increase their involvement in decentralised ecosystems. FATF also warned that countries adopting crypto prohibition frameworks face difficulties in detecting and penalising illicit activities, as restrictions alone are ineffective without strong enforcement mechanisms. Stablecoins Become a Growing Tool for Illicit Activity The report identified stablecoins as an increasing concern, with criminal groups using them for illicit transactions due to their speed, liquidity, and ability to move funds across borders. FATF warned that some criminal networks have started developing proprietary stablecoins designed to resist freezing and asset seizure efforts, demonstrating how illicit actors continue adapting to regulatory measures. The organisation noted that stablecoins now represent a significant share of identified on-chain illicit activity. AI Expands Risks of Digital Asset Crime FATF also highlighted the growing misuse of artificial intelligence in crypto-related crimes, including fraud, hacking, and money laundering operations. Criminal groups are increasingly using deepfakes, synthetic identities, and AI-powered recruitment scams to deceive victims and expand their operations. Major Cases Highlight Global Nature of Crypto Crime The report referenced several cases demonstrating the international scale of digital asset-related crime. One example involved a Cambodia-based financial services group accused of laundering at least $4 billion in illicit proceeds between 2021 and 2025, allegedly supporting organised fraud operations and cyber theft activities. FATF also highlighted the dismantling of a cryptocurrency investment fraud network by Spanish authorities, which allegedly laundered around €460 million from more than 5,000 victims worldwide. These cases underline the importance of international cooperation and the ability of authorities to freeze and seize illicit assets. FATF Calls for Faster Global Crypto Enforcement FATF President Giles Thomson said criminal networks continue to exploit the borderless nature of digital assets to conduct fraud, evade sanctions, and launder criminal proceeds by taking advantage of uneven regulatory implementation. He called on governments and the private sector to strengthen preventive measures, close regulatory gaps, improve cross-border cooperation, and ensure that safeguards keep pace with technological developments. The Future of Crypto Depends on Stronger Compliance Frameworks FATF’s latest report highlights that the next phase of digital asset adoption will depend not only on technological innovation but also on the industry’s ability to establish stronger compliance and oversight systems. As stablecoins, tokenisation, and decentralised finance become more integrated into the global financial system, regulatory coordination will play a critical role in maintaining trust. The key challenge is no longer whether digital assets can transform financial markets, but whether regulators and industry players can build frameworks capable of supporting innovation while preventing criminal exploitation.