The Financial Action Task Force has issued a report highlighting stablecoins as the primary vehicle for illicit cryptocurrency transactions, accounting for the majority of suspicious volumes in recent years. The watchdog points to their use by actors in sanctioned countries like Iran and North Korea for sanctions evasion and money laundering. It calls for enhanced regulatory measures to address these risks.
The Financial Action Task Force (FATF), the global standard-setter for anti-money laundering efforts, released a 42-page report on March 3, 2026, warning that stablecoins have become the most widely used virtual asset in illicit transactions. According to the report, stablecoins accounted for 84% of the $154 billion in illicit virtual asset transaction volume in 2025, as cited from a Chainalysis analysis. This marks a significant rise, with TRM Labs reporting that illicit entities received $141 billion in stablecoins that year, the highest in five years.
The FATF emphasized stablecoins' role in activities tied to fraud, scams, and sanctions evasion, particularly by actors in Iran and North Korea. For instance, it noted cases involving North Korean and Iranian entities using stablecoins like USDT for proliferation financing and cross-border payments linked to sanctioned operations. In 2024, illicit stablecoin activity related to fraud and scams alone reached approximately $51 billion. Sanctions-related flows made up 86% of illicit crypto transactions in 2025, with bad actors relying heavily on stablecoin platforms.
A key vulnerability identified is peer-to-peer transfers via unhosted wallets, which bypass traditional anti-money laundering controls. The report urges countries to impose AML obligations on stablecoin issuers and explore tools such as wallet freezing and restrictions on smart contract functions. With the stablecoin market exceeding $300 billion in value and monthly activity surpassing $1 trillion on several occasions last year, the FATF stressed the need for swift regulatory action to close compliance gaps as adoption grows.
The watchdog stopped short of recommending blanket blacklisting but highlighted the accelerating risks from these dollar-pegged tokens in global illicit finance.
