Globally stablecoins – a market with more than 250 coins in circulation as of mid-2025 and a capitalization value exceeding US$300 billion – pose serious illicit finance risks, according to a recent report.

As well, stablecoins accounted for 84% of illicit virtual asset transactions last year, often involving unhosted wallets – that is, cryptocurrency accounts held outside financial institutions – and complex laundering techniques to obscure the origins of funds, according to data cited in The Targeted Report on Stablecoins and Unhosted Wallets released on March 3 by the Financial Action Task Force ( FATF ), a Paris-based global money-laundering watchdog,  

“Price stability, liquidity and interoperability support legitimate use [of stablecoins], but also make them attractive for criminal misuse,” the FATF report notes, and “a preferred method for laundering proceeds from ransomware, phishing and other cyber-enabled crimes”.

Peer-to-peer transactions via unhosted wallets can take place without the intermediation of a regulated virtual asset service provider or financial institution. “[Thus] stablecoin issuers may face difficulties in controlling cross-chain activities,” the report points out, “which may therefore fall outside counter illicit finance controls.”

FATF president Elisa de Anda Madrazo, says in the report that stablecoin “assets can be hijacked by a whole range of illicit actors, from fraudsters to terrorist financiers” and she hopes that the FATF report “will help countries and the private sector mitigate illicit finance risks, including where stablecoins are being moved through peer-to-peer transactions.”

Only a few jurisdictions have regulatory frameworks that acknowledge how stablecoins differ from other virtual assets, and FATF standards don’t require the adoption of regulatory frameworks for stablecoin arrangements beyond those for virtual asset service providers.

“[However,] the FATF urges countries to recognize the specific money laundering, terrorist financing and proliferation financing risks associated with stablecoins,” de Anda Madrazo shares, “and to implement proportionate and effective mitigating measures that reflect their distinct characteristics.”

At the same time, market participants – including stablecoin issuers, virtual asset service providers and financial institutions – should be, according to the FATF president, “subject to clear anti-money laundering and countering the financing of terrorism obligations.”

Good practices, such as requiring stablecoin issuers to adopt risk‑based technical and governance controls, and developing strong technical skills for supervisors and law enforcement authorities, the report states, should be followed.

To strengthen domestic and international cooperation, the report also recommends tools and legal frameworks as well as public‑private and “tactical” partnerships for investigations.

Case studies showing how new technologies, blockchain analysis and other measures have been used to detect and disrupt illicit stablecoin activity are included in the report, which is based on 50 submissions.