FATF Warns That Stablecoins Are the Primary Tool for Illegal Transactions, Calls for Enhanced Oversight

ChainCatcher report, according to CoinDesk, the FATF (Financial Action Task Force), the international standard-setting body for anti-money laundering, has released a report warning that stablecoins have become the most widely used virtual assets in illicit transactions, calling for stronger regulation of issuers. Citing Chainalysis data, the report states that in 2025, stablecoins accounted for 84% of illicit virtual asset transaction volumes, totaling $154 billion. TRM Labs reported that illicit entities received $141 billion in stablecoins in 2025, a five-year high, with sanctions-related activities accounting for 86% of illicit crypto flows. Actors such as Iran and North Korea are using stablecoins like USDT to finance the proliferation of weapons of mass destruction and cross-border sanctioned payments. FATF warned that peer-to-peer transfers via non-custodial wallets represent a critical vulnerability, as such transactions can circumvent AML controls. FATF urged countries to impose AML obligations on stablecoin issuers and consider requiring them to have the ability to freeze wallets and restrict certain smart contract functionalities. The current market capitalization of stablecoins exceeds $300 billion.