FATF warns on stablecoin fraud

Elisa de Anda Madrazo, president of the Financial Action Task Force, said on May 14 that stablecoins are a “major contributor” to the recent global rise in scams and fraud, linking the warning to a FATF report published in March. The Paris-based watchdog has already told governments that stablecoins now pose distinct money-laundering, terrorist-financing and proliferation-financing risks, especially when they move peer-to-peer through unhosted wallets. The warning lands as the stablecoin market has climbed past $321 billion, according to industry tracking cited in recent market reports, and as companies and regulators push deeper into payment use cases. FATF’s message is that growth in the market is outpacing the spread of controls. ### Who issued the warning, and what exactly did she say? Elisa de Anda Madrazo made the comments in an interview with AML Intelligence’s “Collared” podcast, in excerpts published on May 14. She said fraud growth was “out of control” and pointed to U.S. fraud growth of 25% in one year, adding that FATF had examined how virtual assets, including stablecoins, are used in scams and fraud. The May 14 excerpts said de Anda tied the problem to uneven adoption of FATF standards, especially the “travel rule,” which requires financial institutions and virtual-asset service providers to share originator and beneficiary information for transactions above set thresholds. She said only a limited number of jurisdictions had implemented that regulation. (amlintelligence.com) ### What did FATF’s March report find about stablecoins? FATF said on March 3 that criminals are misusing stablecoins through peer-to-peer transactions via unhosted wallets and through cross-chain activity that can fall outside existing counter-illicit-finance controls. The watchdog said more than 250 stablecoins were in circulation by mid-2025 and that the sector’s market capitalization had exceeded $300 billion. (amlintelligence.com) Chainalysis data cited by FATF said stablecoins accounted for 84% of illicit virtual-asset transaction volume in 2025. FATF said the tokens’ price stability, liquidity and interoperability support legitimate use, but also make them attractive for money launderers, terrorist financiers and state-linked cybercriminal groups. (fatf-gafi.org) ACAMS, summarizing the same report on March 3, said FATF also encouraged governments to require issuers to adopt risk-based technical and governance controls, including the ability to freeze, burn or withdraw stablecoins in the secondary market. ### How big is the market that regulators are trying to police? An April market report published on May 2 said total stablecoin market capitalization passed $321 billion in April, setting a record high for the sector. (fatf-gafi.org) That report said dollar-backed tokens accounted for more than $320 billion of circulating supply, with Tether’s USDT at about $188 billion and Circle’s USDC at roughly $78 billion. (acams.org) Industry reports have also put stablecoin transfer volume above the combined throughput of Visa and Mastercard. Those figures come from market analysts and industry-backed studies rather than FATF, but they help explain why supervisors are focusing on payment rails, issuer controls and intermediary obligations as stablecoins move further into mainstream settlement and cross-border transfers. (stablecoininsider.org) ### Why are unhosted wallets and cross-chain transfers central to the concern? FATF’s March report said peer-to-peer transfers through unhosted wallets happen without a regulated intermediary such as a virtual-asset service provider or financial institution. That means customer checks, transaction monitoring and information-sharing rules may not apply in the same way they do on supervised platforms. (openfx.com) Cross-chain activity is another gap identified by FATF. The watchdog said stablecoin issuers may struggle to control activity when tokens move across multiple blockchains, creating points where anti-money-laundering controls can weaken or disappear. ### What are regulators and firms likely to watch next? (fatf-gafi.org) FATF said countries should fully implement Recommendation 15 so that stablecoin issuers, intermediary virtual-asset service providers, financial institutions and other participants in stablecoin arrangements are subject to clear anti-money-laundering and counter-terrorist-financing obligations. The group said only a limited number of jurisdictions have built targeted frameworks that account for the specific features of stablecoins. (fatf-gafi.org) May 18 is the next dated milestone in this story. AML Intelligence said the full de Anda interview will be released that day as part of the launch of the first two episodes of its 12-part “Collared” podcast series, while FATF’s March report remains the baseline document regulators and compliance teams are using to frame the stablecoin debate. (amlintelligence.com) (fatf-gafi.org)