FATF: Stablecoin Peer-to-Peer Transfer Identified as Key Money Laundering Risk, Recommends Issuers to Implement Freezing and Blacklisting Mechanisms

March 5th, the Financial Action Task Force (FATF) — the global anti-money laundering body — noted in its latest report that stablecoin peer-to-peer (P2P) transfers are a major money laundering risk in the crypto ecosystem, particularly when users transact directly via non-custodial wallets. Without regulated intermediaries, these activities are harder to trace and regulate. FATF added that stablecoins are now the most widely used virtual asset in illicit crypto transactions. Citing Chainalysis data, 84% of the roughly $154 billion in illicit crypto transactions in 2025 involved stablecoins. The report recommends jurisdictions require stablecoin issuers to have the technical ability to freeze, burn, or blacklist assets linked to suspicious addresses when needed, and integrate compliance features like allowlists and denylists into smart contracts. FATF noted that unlike volatile Bitcoin and Ethereum, stablecoins like Tether (USDT) and USD Coin (USDC) are increasingly used by criminal networks for fund transfers and money laundering due to their price stability, high liquidity, and ease of cross-border movement. Additionally, the report mentions North Korean-linked hacker groups and Iran-associated entities are using stablecoins to launder illicit proceeds and convert funds to fiat via over-the-counter (OTC) traders or P2P platforms. FATF called for stronger regulation of stablecoin issuers and wider adoption of blockchain analysis tools and anti-money laundering (AML) measures like the “Travel Rule” across the crypto industry.