Stablecoins now account for most illicit on-chain activity, according to the Financial Action Task Force (FATF).
Mass adoption of stablecoins will amplify illicit finance risks, particularly when it is handled unevenly across difference jurisdictions, the FATF said in a new report about anti-money laundering and counter-terrorist financing (AML/CFT).
The FATF estimated there was approximately $51 billion in illicit on-chain activity relating to fraud and scams in 2024.
Stablecoins, tokens pegged to the value of a traditional financial asset such as a fiat currency, have been enjoying some tailwinds in recent months thanks to progress toward regulation of the sector in the U.S., amongst other places.
The total market cap of all stablecoins surpassed $250 billion for the first time earlier this month.
The FATF highlighted the importance of “travel rule” compliance in curbing money laundering and terrorist financing. The travel rule is a set of requirements on the sharing of information about the originator and beneficiary of cross-border payments.
Noting that 99 jurisdictions have passed legislation implementing the travel rule or are in the process of doing so, the FATF noted that they nevertheless experience difficulties in identifying natural or legal persons that conduct virtual asset service provider (VASP) activities.
Crypto AML specialist Notabene said it expected almost all cryptocurrency firms to be compliant with the travel rule in a report published in April. Notabene had surveyed 91 VASPs, with 90% saying they expect to be fully compliant my midyear and all saying they expected to be so by the end of the year.
Read more: Fewer Than 30% of Jurisdictions Globally Have Started Regulating Crypto: FATF Chief