The Financial Action Task Force (FATF) said that “stablecoins are the most popular virtual asset used in illicit transactions,” including in Iran and North Korea, and therefore called for stricter oversight of stablecoin issuers in a 42-page report published on Tuesday.
In January 2026, the global watchdog said it had found that stablecoins accounted for the majority of illicit on-chain activity. It was estimated that there would be 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 have become a key vehicle for illicit financing. It cited a Chainalysis report that said 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 like USDT to finance proliferation and cross-border payments linked to sanctioned activities.
TRM Labs published a report in mid-February that said that in 2025, illicit entities received $141 billion in stablecoins, the highest level seen in five years. The report noted that overall stablecoin activity exceeded $1 trillion per month on several occasions last year. Sanctions-related activity accounted for 86% of illicit crypto flows, according to the report, with bad actors primarily relying on stablecoin platforms.
The FATF said peer-to-peer transfers via unhosted wallets present a “key vulnerability” because these types of transactions can occur without anti-money laundering controls.
While stopping short of 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 wallet freezing and banning or restricting features built into smart contracts.
With stablecoins surpassing $300 billion in market value, the FATF warned that regulators must act quickly to close compliance gaps as adoption accelerates.
