Stablecoins In Finance

Having built fraud systems transacting billions at Coinbase and Sardine, want to share something about the stablecoin gold rush that nobody's talking about. I’ve been a believer in on-chain finance since 2015, when Rob Witoff, Olaf and Brian Armstrong asked me to help build the most compliant, good-actor in the crypto industry: Coinbase. In 2025, the world is talking about stablecoins since Stripe acquired Bridge, and volumes exploded. However, This week, Airwallex's CEO, Jack had a thought provoking post on stablecoins which got the industry talking. Airwallex are a major player in cross-border money movement. And Jack’s point was that not all cross-border transactions need stablecoins. In particular, not in G10 currencies as FX spreads are thin and payments are already instant. But here's where it gets interesting… Artemis just released data showing 400% YoY growth in B2B stablecoin payments. The growth isn't happening where you think: ✅ Long-tail markets where traditional banking breaks down ✅ "Exotic" FX pairs that cost 5-8% in traditional rails ✅ Corporate treasury ops that need 24/7, instant settlement Everyone sees the Stripe-Bridge acquisition and thinks "should I be involved?" What they don't see: the compliance nightmare. I can tell you the risks are massive: - Global by default = some of those regions could be high risk - Sanctioned regions are nearly impossible to identify when recipients are just wallet addresses - Mixing on-chain and off-chain AML checks? Good luck. - Your KYC is only as strong as your weakest market or counterparty Often, stablecoins are treated as cash-like, but most payments and fraud ops teams aren’t set up to work that way, The companies that figure out compliance first can capture the stablecoin opportunity. The ones that don't will become cautionary tales. If you're building in this space, the fraud and compliance piece isn't optional. It's critical. Thoughts? 👇

Stablecoins are being held primarily in their most anonymous form, contrary to a long held policy preference for less anonymity in who holds and moves money to prevent illicit finance activities. While around 7% of traditional money (US dollar cash+bank deposits) is held as cash, the most anonymous form, in the modern money stablecoin ecosystem around 70%-75% (of USDC & USDT) are held in the most anonymous form (self-custody wallets). Consequently, GENIUS & MICA regulatory frameworks will likely have only a modest effect in preventing illicit activity. My Per Jacobsson lecture at the Bank for International Settlements – BIS presents this new research with Kyle Calder, Wenxin Du, and Jeremy stein, and discusses policy implications. You can read more and watch the presentation here: https://lnkd.in/eG5wyhxB

#Stablecoins are moving from the margins to the mainstream. They promise speed, efficiency, and new ways to move money. But with every new rail comes a familiar challenge: fraud. Counterfeit tokens, mismanaged reserves, fake wallets, and weak KYC checks are already showing up. Because stablecoins look like safe digital cash, consumers may drop their guard. This is where banks and credit unions must step in, not just as passive observers, but as active protectors of trust. Due diligence matters. Not all stablecoins are created equal. Financial institutions can vet issuers, reserves, and partners with the same rigor they apply to traditional payment rails. Consumer protection is non-negotiable. Educating customers, building in the safeguards, and setting clear standards will separate leaders from laggards. #AI can be the shield. From detecting transaction anomalies in real time, to spotting deepfake IDs during onboarding, to continuously verifying reserves, AI can catch what humans miss and make fraud prevention scalable. I’m talking with SmartBots AI about this very topic. If we don’t demand rigor now, the headlines will be about fraud, not innovation. But if traditional FIs combine their reputation for trust with AI-powered vigilance, they can own the stablecoin conversation. Your customers won’t remember who moved money fastest. They’ll remember who kept it safe. #Banking #CreditUnions #Fintech #Stablecoins #FraudPrevention #AI #sundaythoughts

👾The 2025 Crypto Crime Report by Chainalysis is now available, revealing striking insights into financial crime in the crypto sector. According to the report, #illicittransaction volumes in 2024 exceeded $51 billion, a figure significantly higher than initial estimates. The report highlights how #cryptocrime has become increasingly sophisticated and professionalized. Key trends include: • #Stablecoins and DeFi at the Core of #MoneyLaundering: Stablecoins accounted for 63% of all illicit transactions in 2024, surpassing #Bitcoin. Their speed, liquidity, and regulatory blind spots make them the preferred tool for concealing #illicitfinancialflows. • The Rise of #AIFraud: Fraud schemes powered by #artificialintelligence are growing exponentially, with deepfake scams, synthetic identities, and automated #phishing attacks becoming harder to detect. • #Ransomware: Payments Decline, but Tactics Evolve: Ransomware payments dropped 35% year-over-year, yet attackers are adapting. Many now focus on #datatheft and #extortion rather than direct ransom payments. • #MarketManipulation and #WashTrading: Artificially inflated trading volumes remain a major threat, with an estimated $2.57 billion in #fraudulenttrading activity on decentralized exchanges (DEXs). Global regulators are stepping up enforcement, particularly in the stablecoin sector, but #cryptocriminals continue to innovate, creating an ongoing cat-and-mouse game between illicit actors and #compliance efforts. #complianceofficer #dirtymoney #followthecryptomoney #aml #antimoneylaundering

"The rapid evolution of #cryptoassets, including #stablecoins, and retail central bank digital currency (#CBDC) has led to changes in #regulatory_frameworks to incorporate them. The expansion of options beyond bank deposits and cash calls for a holistic analysis of the effectiveness of anti-money laundering (#AML) and combating the financing of terrorism (#CFT) regimes across different payment instruments. … Several conceivable #regulatory_options can apply consistently across payment instruments #without_intermediaries. First, for all instruments in this group, AML/CFT frameworks can leverage touch points, or #entry_exit_points, where illicit funds interact with those intermediaries in the first group of instruments, while acknowledging that this is a partial solution as it only allows for the monitoring of incoming and outgoing transactions.   Examples of such touch points include #cash_withdrawals or #deposits with #commercial_banks and the conversion between self-hosted #stablecoins and commercial bank deposits or e-money. …   A stronger emphasis could be placed on the responsibilities of and enforcement by the #issuers_of_payment_instruments. As issuers of banknotes, central banks have a role to play, as illustrated by the decision of the Eurosystem to discontinue the issuance of EUR 500 notes in 2019 to address AML/CFT concerns. Similarly, #stablecoin_issuers have complied with requests from authorities to freeze the coins in self-hosted wallets associated with illicit activities."   — From: Andrea Minto, Anneke Kosse, Takeshi Shirakami and Peter Wierts, From Cash to Crypto: Towards a Consistent Regulatory Approach to Illicit Payments, Bank for International Settlements [#BIS], BIS Papers No. 166, March 3, 2026   The full paper is here: https://lnkd.in/geZds7wy

🚨 Cool case alert! In November 2024, federal prosecutors in Wisconsin, working with the Drug Enforcement Administration moved to seize more than $5.5 million in USDT tied to an international cartel money laundering network. TRM Labs is proud to have supported law enforcement in this investigation. The case offers a window into how criminal organizations increasingly use stablecoins to move and disguise narcotics proceeds, and how law enforcement is adapting with a combination of blockchain intelligence and traditional investigative techniques. The scheme began with bulk cash from cocaine sales in the United States, collected by money brokers working for the cartel. Rather than relying only on couriers or traditional banking channels, the funds were converted into cryptocurrency and funneled into accounts at a virtual asset service provider. One such account—identified in court filings as Account 7382—processed more than $15 million, acting as a central node for laundering. From there, the money was pushed through multiple blockchains, using a series of unhosted wallets. Ultimately, investigators traced the funds into two TRON addresses that held more than $5.5 million in USDT, both of which were seized. What makes this case significant is not just the amount of money involved but the investigative playbook. DEA agents and federal prosecutors paired undercover work and confidential informants with the use of advanced blockchain tracing tools. They also scrutinized shell companies linked to the laundering network, uncovering tens of millions of dollars in suspicious transactions. This layered approach allowed authorities to stitch together what might otherwise have been invisible connections across digital wallets, companies, and individuals. The legal framework behind the seizure drew on both traditional drug forfeiture statutes and broader money laundering laws, underscoring that digital assets are treated no differently than cash or bank wires when linked to illicit activity. While the filings do not detail specific arrests, the forfeiture action itself strips the network of millions in working capital, disrupting operations that depend on quick liquidity. More broadly, the case illustrates the growing role of stablecoins in cartel finance. Tether’s liquidity and global reach make it attractive for laundering at scale, while the cross-chain movement of funds highlights the adaptability of criminal actors. Yet the success of this seizure shows the other side of the coin: that blockchain’s transparency, when paired with traditional law enforcement tradecraft, can be a powerful tool for disruption.

Methinks, I spot a pattern. Facebook hosts scores of "KYC Buy Sell" groups. Individuals offer to sell or seek to buy existing accounts at banks, crypto exchanges, and other online platforms that have KYC-esque requirements (ex. Uber, Ebay, Amazon, OnlyFans, Airbnb, etc.) https://lnkd.in/eHeefb35 The KYC'd accounts are used to receive and move illicit funds (aka #dropaccounts ), and/or undertake fraud schemes (ex. fake Airbnb listings). Participants post screenshots of "proof of payment" to demonstrate their trustworthiness. The proof of payment screenshots posted to Facebook are telling... 🔸 One crypto exchange, Binance, is the almost exclusive venue where the transactions are executed via P2P crypto transfers. 🔸 One stablecoin, USDT, is the almost exclusive payment method used. Sure, some of the "proof of payments" may be fake but even so, why would fake payments still show the same exchange and crypto token? We are told that all an investigator needs to do is trace illicit crypto to a compliant crypto exchange to get KYC data to identify the perpetrator. Yet, the KYC information is often a dead-end because it was purchased via a crypto exchange. ps. P2P crypto transfers are not reflected on the blockchain. #cryptocrime #KYC #dropaccount #moneymule #cryptoexchange #scams #fraud #TheFutureOfFinance #stablecoins #P2P

Blockchain researcher Bitrace has published an interesting report about money laundering or "score running" using stablecoins. Illicit actors transfer payments from high-risk users to low-risk users’ accounts, thereby evading the risk control measures of payment institutions. Traditional score running involves transferring, splitting, and cashing out funds from personal accounts such as banks, WeChat, and Alipay. In recent years, cryptocurrencies — especially stablecoins — have become new tools for score running. Illicit actors can also use platforms with weak AML/CFT controls. "Some proxy payment platforms accept USDT deposits and use fiat funds to help users make payments on other platforms, including topping up on online gambling platforms, settling member funds for fund platforms, giving gifts on live broadcasting platforms, placing orders on e-commerce platforms, and even paying salaries to employees." Proxy payment platforms with weak AML controls result in a large influx of high-risk funds, allowing illicit actors to cash out without registering accounts on centralized compliant cryptocurrency trading platforms. Bitrace concludes that stablecoins are being exploited by malign actors. Tether, the company behind the stablecoin USDT, this month responded to lawmakers, addressing concerns about the illicit use of USDT. Senator Cynthia Lummis and Representative French Hill in October the Justice Department “to carefully evaluate the extent to which Binance and Tether are providing material support and resources to support terrorism.” At DOLFIN we track it all, including the use of new technologies to launder money. Follow our page and join our growing community of #financialintegrity specialists at www.dolfin.org #aml #amlcft #compliance https://lnkd.in/eeu64dhJ

𝐒𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧-𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐒𝐮𝐜𝐜𝐞𝐬𝐬 𝐈𝐬 𝐍𝐨𝐭 𝐓𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲, 𝐢𝐭’𝐬 𝐚𝐛𝐨𝐮𝐭 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞. 📍Real-time instant (blockchain) payments have arrived with currency-backed stablecoins. The GENIUS Act, MiCA and other regulatory frameworks around the world are ushering in stablecoins but success will depend on compliance (AML). Failure to ensure compliance with global compliance rules will brand stablecoins as ‘𝐝𝐢𝐫𝐭𝐲 𝐦𝐨𝐧𝐞𝐲’ instead of the future of banking. 📍 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐢𝐬 𝐊𝐞𝐲. AML is more than just identity verification. Knowing Your Customer (understanding the nature/purpose of the account&transactions), identifying anomalous transactions, reporting to regulators and protecting the ecosystem is fundamental (and the law). 𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑖𝑛𝑠𝑡𝑖𝑡𝑢𝑡𝑖𝑜𝑛𝑠 𝑎𝑟𝑒 𝑡ℎ𝑒 𝑓𝑖𝑟𝑠𝑡 𝑙𝑖𝑛𝑒 𝑜𝑓 𝑑𝑒𝑓𝑒𝑛𝑠𝑒 𝑎𝑔𝑎𝑖𝑛𝑠𝑡 𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑐𝑟𝑖𝑚𝑒. 📍 𝐅𝐫𝐚𝐠𝐦𝐞𝐧𝐭𝐞𝐝 𝐫𝐮𝐥𝐞𝐛𝐨𝐨𝐤𝐬 = 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐚𝐫𝐛𝐢𝐭𝐫𝐚𝐠𝐞. FATF’s 2024 survey shows 75 % of jurisdictions remain only partially or non-compliant with its virtual-asset standards, letting issuers shop for the lightest touch. Laying transactions (fiat – stables-fiat-stables) create walls that may prevent effective compliance reviews. 📍 𝐇𝐢𝐠𝐡-𝐯𝐞𝐥𝐨𝐜𝐢𝐭𝐲 𝐥𝐚𝐲𝐞𝐫𝐢𝐧𝐠. Dollar-pegged tokens can be swapped, bridged and redeemed in seconds, giving launderers a fast “second layer” that breaks the audit trail. ✔ Speed + liquidity = prime layering tool. 📍 𝐒𝐚𝐧𝐜𝐭𝐢𝐨𝐧𝐬-𝐞𝐯𝐚𝐬𝐢𝐨𝐧 𝐢𝐧 𝐚𝐜𝐭𝐢𝐨𝐧. DOJ’s Evita Pay indictment alleges > $530 M USDT moved from sanctioned Russian banks into U.S. accounts—proof that stablecoins can skirt correspondent-bank filters. 📍 𝐊𝐘𝐂 𝐁𝐥𝐢𝐧𝐝 𝐒𝐩𝐨𝐭𝐬. Some issuers/exchanges still run thin checks, and 30 % of surveyed jurisdictions have no Travel-Rule law on the books—leaving originator/beneficiary data out of reach. 📍 𝐃𝐞𝐅𝐢 & 𝐮𝐧𝐡𝐨𝐬𝐭𝐞𝐝 𝐰𝐚𝐥𝐥𝐞𝐭𝐬 𝐦𝐚𝐠𝐧𝐢𝐟𝐲 𝐞𝐱𝐩𝐨𝐬𝐮𝐫𝐞. Peer-to-peer stablecoin transfers bypass regulated VASPs, eroding SAR triggers and making on-chain analytics your last line of defense. ✅✅ 𝐁𝐨𝐭𝐭𝐨𝐦 𝐥𝐢𝐧𝐞: map every stablecoin touch-point, press counterparties for Travel-Rule readiness, and plug chain-analysis into your AML stack. Stabelcoins will redefine money movements but its success will depend on strict adherence to fundamentals of compliance and blocking financial crimes. #stablecoins #banking #finance #blockchain #crypto #AML #regulations #genuisact

Stablecoins and Money Laundering: A Nuanced Look Stablecoins are often praised for their stability and efficiency in digital transactions. However, even with robust KYC (Know Your Customer) procedures, there are ways they could inadvertently facilitate money laundering. Here’s why: 👉🏾 Peer-to-Peer Transfers: Even if exchanges implement strict KYC, stablecoins can move quickly across peer-to-peer networks, making tracing complex. 👉🏾 Layering Transactions: Criminals can split funds into multiple small transfers or use multiple platforms, which can evade automated KYC monitoring. 👉🏾 Cross-Border Complexity: Different jurisdictions have varying regulations, allowing funds to move through regulatory gaps. Key Insight: KYC alone is not a silver bullet. Combating illicit use of stablecoins requires layered approaches: monitoring blockchain patterns, international cooperation, and real-time analytics. Stablecoins are powerful tools, and like any tool, their impact depends on how responsibly we manage them. #Blockchain #Stablecoins #FinTech #Compliance #AML #CryptoRegulation