The Financial Action Task Force has identified peer-to-peer stablecoin transfers conducted through self-custody wallets as a potential vulnerability in the global anti-money laundering framework. In a new report, the watchdog said such transactions can occur without regulated intermediaries, limiting oversight typically applied by exchanges and custodians.
According to the FATF, transfers executed directly between unhosted wallets may bypass standard AML and counterterrorism financing controls. While public blockchains provide transaction traceability, the pseudonymous structure of wallet addresses can complicate attribution and enforcement. The group urged jurisdictions to assess risks associated with stablecoin arrangements and apply proportionate mitigation measures.
The report comes as stablecoins expand across payments and cross-border transfers. Citing industry data, the FATF noted that illicit activity represents a small share of overall crypto transaction volume, though stablecoins account for a significant portion of identified illicit flows.
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