The Financial Action Task Force (FATF) has called on governments to accelerate enforcement of anti money laundering standards for digital assets, warning that criminal organizations are increasingly relying on stablecoins to move illicit funds across borders.
In its latest annual review of virtual asset regulation, released on July 16, the global watchdog said stablecoins now account for most identified onchain criminal activity. While many countries have adopted crypto compliance laws, FATF warned that inconsistent enforcement continues to leave significant gaps that organized crime groups are exploiting.
Key Takeaways
- FATF says stablecoins are now the primary digital assets used in identified onchain criminal activity.
- Criminal organizations have begun creating proprietary stablecoins designed to resist freezes and asset seizures.
- Eighty three percent of surveyed jurisdictions have adopted the Travel Rule into law, up from 73% last year.
- FATF warned that enforcement remains inconsistent despite growing legal adoption of crypto AML standards.
- Offshore crypto service providers and decentralized finance platforms continue to present major regulatory challenges.
Stablecoins Emerge as a Growing Concern
According to FATF’s seventh annual assessment of virtual asset regulation, stablecoins have become the preferred cryptocurrency for many forms of illicit finance. Unlike more volatile digital assets, stablecoins maintain a relatively stable value by being pegged to fiat currencies such as the U.S. dollar. Their price stability, combined with fast cross border transfers, has made them useful for legitimate payments while also attracting criminal networks seeking efficient ways to move funds. The report also highlighted a troubling shift in criminal tactics.
Rather than relying solely on established stablecoins, some organized crime groups are now issuing their own tokens designed specifically to avoid issuer intervention and law enforcement action.
One example cited by FATF involved Cambodia based financial services conglomerate Huione Group. After a legitimate stablecoin issuer froze more than $29 million connected to wallets linked to the organization, the group introduced its own stablecoin and promoted it as resistant to asset freezes and regulatory oversight.
The watchdog said this reflects a broader effort by criminal networks to reduce the effectiveness of traditional compliance tools used by stablecoin issuers.
Investment Fraud Remains a Major Source of Illicit Activity
The report also pointed to several recent enforcement actions illustrating how cryptocurrencies continue to facilitate large scale financial crime. Among them was a June 2025 operation in Spain, where authorities dismantled an alleged crypto investment fraud network accused of laundering approximately €460 million stolen from more than 5,000 victims around the world.
The investigation involved so called “pig butchering” scams, in which fraudsters spend weeks or months building trust with victims before convincing them to transfer funds into fraudulent cryptocurrency investments. Cases such as these continue to reinforce concerns among regulators that stronger international cooperation remains necessary to combat cross border crypto crime.
Progress on Regulation Outpaces Enforcement
FATF acknowledged that governments have made measurable progress in adopting digital asset regulations.
The organization reported that 83% of surveyed jurisdictions have now incorporated the Travel Rule into domestic law, compared with 73% one year ago.
The Travel Rule requires virtual asset service providers and financial institutions to exchange basic information about senders and recipients for qualifying cryptocurrency transfers, similar to the information banks exchange during traditional wire transfers. Despite the improvement, FATF stressed that legal adoption alone is insufficient.
Many countries have yet to establish consistent supervision, licensing, and enforcement mechanisms capable of ensuring crypto businesses comply with those requirements.
The report also identified offshore virtual asset service providers and decentralized finance platforms as continuing regulatory blind spots, where fragmented oversight can make monitoring illicit transactions more difficult.
Users Should Expect Tighter Compliance Requirements
Although FATF’s recommendations do not seek to restrict the ownership or use of cryptocurrencies, they signal that governments are likely to intensify compliance efforts across the industry. For everyday users, this could translate into stricter identity verification procedures, additional information requests when transferring digital assets between platforms, and closer scrutiny of stablecoin transactions.
The report also comes as the United Kingdom begins its two year presidency of FATF, with the organization pledging to strengthen international efforts against fraud and improve oversight of virtual assets.
FATF President Giles Thomson urged governments and the private sector to address remaining regulatory weaknesses, warning that criminal organizations continue to exploit the borderless nature of digital assets to facilitate fraud, sanctions evasion, and money laundering.
Conclusion
FATF’s latest review underscores the growing challenge regulators face as stablecoins become more deeply integrated into the global financial system. While countries have made meaningful progress by introducing crypto specific anti money laundering rules, the watchdog believes enforcement has not kept pace with the sophistication of criminal networks.
As regulators strengthen oversight and close remaining compliance gaps, the coming months are likely to bring stricter enforcement of the Travel Rule, increased scrutiny of stablecoin transactions, and closer supervision of offshore crypto businesses and decentralized finance platforms.
