The Financial Action Task Force (FATF) said that stablecoins are now commonly used in money laundering, terrorist financing, and proliferation financing schemes, and warned that peer-to-peer transfers via unhosted wallets represent a key vulnerability for the crypto ecosystem. 

In a targeted report published Tuesday, the intergovernmental group said, that as of mid-2025, more than 250 stablecoins were in circulation, with total market capitalization above $300 billion and daily trading volumes surpassing those of Bitcoin. Reporting indicates that stablecoins have become the most popular virtual asset used in illicit transactions, FATF said. 

The report focuses on P2P transfers of stablecoins between unhosted wallets, and warns that such transfers may fall outside of the scope of existing frameworks to prevent illicit activity. The use of unhosted wallets in cross-border transfers can make tracing illicit flows particularly difficult, the watchdog organization said. 

The report sets out recommended actions for jurisdictions, including applying FATF Recommendation 15 to entities involved in stablecoin arrangements, requiring clear and enforceable obligations for issuers and intermediary virtual asset service providers, strengthening supervisors’ and law-enforcement technical capabilities, including the use of blockchain analysis tools, and actively monitoring loopholes such as P2P volumes via unhosted wallets and informal or unregistered redemption channels. 

FATF also called on jurisdictions to consider public-private partnerships and sandboxes to develop solutions, such as smart-contract monitoring, blockchain forensics, and automated sanctions screening. Private-sector firms should consider how to apply robust anti-money-laundering and counterterrorism-financing controls from issuance of the digital coins to their point of redemption, according to the report. 

An annex lists risk indicators for unusual stablecoin activity, including rapid cross-border movements inconsistent with a customer profile, large-value transfers to multiple beneficiaries within a short timeframe, and rapid conversions between fiat and stablecoins with no evident economic rationale. 

Read the FATF report here