The Financial Action Task Force (FATF) said that “stablecoins are the most popular virtual asset used in illicit transactions”, notably in Iran and North Korea, and therefore called for stricter monitoring of stablecoin issuers in a 42-page report released on Tuesday.
In January 2026, the global watchdog said it found that stablecoins accounted for most illicit on-chain activity. He estimated that there would have been approximately $51 billion in illicit stablecoin activity related to fraud and scams in 2024.
In its March 2026 report, the task force again warned that dollar-pegged tokens had become a key vehicle for illicit financing. He cited a Chainalysis report that 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 related to sanctioned activities.
TRM Labs released a report in mid-February stating that in 2025, illicit entities received $141 billion in stablecoins, the highest level seen in five years. The report notes that overall stablecoin activity exceeded $1 trillion per month on multiple occasions last year. According to the report, sanctions-related activities accounted for 86% of illicit crypto flows, with bad actors primarily relying on stable platforms.
The FATF said peer-to-peer transfers through unhosted wallets present a “key vulnerability” because these types of transactions can take place without anti-money laundering controls.
Without calling for a blanket blacklist, the FATF urged countries to impose anti-money laundering (AML) obligations on stablecoin issuers and consider requiring tools such as freezing wallets and banning or restricting functions embedded in smart contracts.
With the market value of stablecoins now exceeding $300 billion, the FATF has warned that regulators must act quickly to close compliance gaps as adoption accelerates.
