FATF flags AML risks from peer-to-peer stablecoin transfers, points to freeze and deny-list safeguards

The Financial Action Task Force (FATF) has identified significant anti-money laundering (AML) risks stemming from peer-to-peer (P2P) stablecoin transfers utilizing "unhosted" wallets, as these transactions bypass regulated intermediaries. To counter illicit finance, the FATF report encourages stablecoin issuers to implement technical measures allowing them to block, freeze, and withdraw stablecoins at any time. Furthermore, jurisdictions should consider requiring customer due diligence at redemption, transaction limits, and 24/7 law enforcement contact points for asset freezes. The report highlights that state-linked groups, like North Korea's Lazarus Group, are increasingly using stablecoins for laundering cybercrime proceeds, while Iranian actors use them to evade sanctions. Separately, an ECB working paper noted that stablecoin adoption causes a "deposit-substitution mechanism," potentially weakening monetary policy transmission by increasing banks' reliance on wholesale funding and importing foreign monetary conditions if foreign-currency stablecoins are widely adopted.

(Source：The Block)