The Financial Action Task Force (FATF) said “stablecoins are the most popular virtual asset traded illegally” including in Iran and North Korea, calling for stricter regulation of stablecoin issuers in a 42-page report released on Tuesday.
In January 2026, the global regulator said it found stablecoins to be responsible for the majority of illegal on-chain activity. It is estimated that illicit stablecoin activity related to fraud and scams will be worth approximately $51 billion in 2024.
In its March 2026 report, the task force again warned that U.S. dollar-pegged tokens have become a major vehicle for illicit finance. It cited a report by Chainaanalysis stating that stablecoins accounted for 84% of the $154 billion in illegal virtual asset trading volume in 2025. The report highlights 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 reported in mid-February that illegal entities received $141 billion in stablecoins in 2025, the highest level in five years. The report noted that overall stablecoin activity exceeded $1 trillion per month multiple times last year. Sanctions-related activity accounts for 86% of illicit cryptocurrency flows, with bad actors primarily relying on stablecoin platforms, the report said.
The FATF said peer-to-peer transfers through non-custodial wallets present “critical vulnerabilities” as such transactions can occur without anti-money laundering controls.
While not 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 limiting functionality embedded in smart contracts.
With the market capitalization of stablecoins now exceeding $300 billion, the FATF warns regulators that they must act quickly to close compliance gaps as adoption accelerates.
