FATF Report Highlights Rising Risks and Vulnerabilities of Stablecoins

Key points include:

➡️ Rapid Market Growth: Stablecoins have scaled significantly, with over 250 in circulation by mid-2025;

➡️ Growing Use in Illicit Finance: Stablecoins are now among the most used virtual assets in illicit transactions, often embedded within complex laundering schemes;

➡️ P2P & Unhosted Wallet Risks: Peer-to-peer (P2P) transactions via unhosted wallets present a key vulnerability, enabling activity outside regulated intermediaries and increasing ML/TF risk;

➡️ Enhanced Vulnerabilities: Features such as price stability, liquidity and interoperability make stablecoins particularly attractive for criminal use;

➡️ Regulatory & Data Gaps: Limited data on stablecoin use in payments and P2P activity creates challenges in assessing scale and monitoring risks effectively;

➡️ Mitigation Expectations: FATF highlights the need for robust AML/CFT frameworks, including obligations on issuers and intermediaries, enhanced monitoring of unhosted wallet activity, and the use of advanced analytics and smart contract controls; and

➡️ Global Coordination: Stronger cross-border cooperation and supervisory alignment are required to address evolving stablecoin risks.

✅ Firms should assess their exposure to stablecoin-related risks, particularly P2P activity and links to traditional finance, and ensure their AML/CFT controls are adapted to this evolving risk.