FATF Raises Concerns About Increasing Stablecoin Misuse Amid Delays in Global Crypto Regulations
The Financial Action Task Force (FATF) released a report this week highlighting improvements in global regulations for virtual assets and service providers, yet noting that the progress is still insufficient, especially as the illicit use of stablecoins has surged dramatically in 2025.
In its sixth targeted update, the intergovernmental watchdog found that while 73% of surveyed jurisdictions have enacted laws mandating the Travel Rule for cryptocurrency transactions, the enforcement of these laws is still lacking.
Of the 85 countries that have Travel Rule legislation, nearly 60% have failed to issue compliance findings or guidelines.
The report also pointed out an alarming theft of $1.46 billion in virtual assets from the crypto exchange Bybit, orchestrated by North Korean actors.
According to FATF, the hackers utilized social engineering and sophisticated laundering schemes involving mixers, OTC traders, and over 125,000 Ethereum wallets. Only 3.8% of the stolen assets were recovered, highlighting ongoing challenges in tracing and retrieving crypto-related proceeds of crime.
Stablecoins have emerged as the primary means for illicit on-chain activities due to their low transaction costs, rapid settlements, and high liquidity.
FATF reported private sector estimates indicating more than $30 trillion in stablecoin transactions over the past year, alongside the rise of ‘pig butchering’ scams and professional fraud networks using AI-generated chatbots and deepfakes to exploit victims.
In spite of these dangers, the report indicated that only one jurisdiction is fully compliant with FATF Recommendation 15 regarding virtual asset oversight. About 29% of countries were deemed ‘largely compliant,’ while around half are only partially compliant and 21% are outright non-compliant.
FATF called on jurisdictions to expedite the licensing and registration of virtual asset service providers, enhance enforcement against unregistered entities, and adopt measures to oversee decentralized finance (DeFi) arrangements.
The report also mentioned that roughly half of the surveyed regulators require DeFi projects with identifiable control parties to register as VASPs, yet enforcement of this requirement is infrequent.
Looking forward, FATF intends to produce focused reports regarding stablecoins, offshore VASPs, and DeFi in the coming year. The regulatory body cautioned that as stablecoins near widespread adoption, inconsistent global regulations could increase illicit finance risks and hinder coordinated responses.
The next detailed update on the implementation of Recommendation 15 is expected in 2026.
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