The Financial Action Task Force (FATF), the global watchdog on financial crimes, has issued a warning about the rising criminal use of stablecoins, drawing wide attention across the crypto industry. However, executives at several blockchain intelligence firms emphasize that the warning should not be seen as a hostile stance against crypto, but rather a call for stronger regulatory frameworks to mitigate the risks of widespread stablecoin adoption.
Senior executives from blockchain analytics platform Chainalysis and digital asset recovery firm Asset Reality stated that FATF is not seeking to ban stablecoins, but to improve the ability to identify and trace illicit use. “This is not anti-crypto — it’s about recognizing that for the industry to gain trust, robust regulatory systems must be in place,” said Aidan Larkin, co-founder of Asset Reality.
In its bulletin released last Thursday, FATF noted that stablecoins are increasingly being used in cross-border money laundering, sanctions evasion, and other illicit financial activities, urging global regulators to keep a close watch on the sector.
Stablecoins Dominate Illicit Transactions, Account for 63%
According to Chainalysis’ 2025 Crypto Crime Report, stablecoins now account for 63% of all illicit on-chain transaction volume, making them the primary asset type used in crypto-related crimes. Jordan Wain, Policy Advisor at Chainalysis, stated that FATF’s concerns are data-driven and that harmonized licensing, real-time monitoring, and international cooperation are key to addressing the problem.
“The transparency of stablecoins enhances their traceability, and centralized issuers can take enforcement actions such as freezing funds,” Wain explained. He cited a notable example from 2023, where Tether froze $225 million in USDT linked to scam operations at the request of U.S. authorities — demonstrating that regulatory tools can be effective.
Despite the availability of advanced blockchain tracking tools, Larkin emphasized that on-chain monitoring alone is insufficient. “It’s just part of the equation,” he said. True deterrence requires stronger enforcement mechanisms — including the application of so-called “secondary sanctions” to compel non-compliant crypto platforms to cooperate.
This approach aligns with FATF’s broader strategy in recent years, which has focused on asset recovery and aligning anti-money laundering (AML) standards between traditional finance and the digital space.
North Korean Crypto Activity Raises Fresh Concerns, Circle Under Scrutiny
Following FATF’s special warning on the Democratic People’s Republic of Korea (DPRK) using stablecoins to circumvent sanctions, well-known crypto investigator ZachXBT revealed that USDC — issued by Circle — is now a “key payment infrastructure” for North Korean IT workers. He stated on social media that he had identified recent “eight-figure” transaction flows, yet Circle has taken no public action to monitor or freeze the suspected activity.
It’s worth noting that in May, Circle complied with a U.S. federal court order to freeze $57 million in USDC on the Solana blockchain linked to the alleged scam group Libra. However, there has been no clear response from the company regarding the North Korea-related flows.
As stablecoins become deeply embedded in cross-border payments, remittances, and the DeFi ecosystem, regulators are increasingly concerned about their risks. FATF’s latest comments are not a move to suppress innovation but a directive to the industry: clear rules, greater visibility, and global collaboration are essential for healthy, sustainable development.
As Larkin concluded: “If digital finance is to thrive, it must be built on a foundation of transparency, fairness, and serious regulatory oversight.”