FATF shows concerns over stablecoin P2P transfers of self-sustaining wallets
Peer-to-peer transfers via self-custody crypto wallets are a key weak point in the stablecoin ecosystem because they can take place without an intermediary, the Financial Action Task Force (FATF) said in a new report, urging countries to strengthen controls over the spread of stablecoins into payments and cross-border transfers.
In its report on Stablecoins, Unhosted Wallets and P2P Transactions, the global anti-counterfeiting watchdog noted that transactions between users directly through unhosted wallets can originate from regulated intermediaries such as exchanges or custodians.
FTF This structure can create gaps in Anti-Money Laundering (AML) controls as transactions occur outside the attention of entities required to monitor activity and report suspicious transfers. The report notes that regulatory focus on stablecoins is growing as their use expands in commerce, payments and cross-border transfers.
The watchdog called on authorities to review the risks posed by stablecoin arrangements and implement “proportionate” mitigation measures, which could include improved monitoring of self-sustaining wallets when they connect to regulated platforms, and clear AML and anti-terrorism funding obligations for entities involved in stablecoin issuance and distribution.
P2P stablecoin transfers are seen as a regulatory blind spot
FATF said that transfers of P2P self-sustaining wallets represent a “key vulnerability” because they can bypass AML controls typically implemented by regulated intermediaries.
These transfers take place directly between users without the involvement of virtual asset service providers (VASPs) or financial institutions, limiting authorities' ability to detect suspicious activity.
Related: Stablecoins, sanctions and surveillance: why 2025 will change the regulatory reality of crypto
Transactions on public blockchains are traceable because activity is recorded on-chain, the FTF said. However, the anonymous nature of wallet addresses makes identification more difficult.
RELATED: France arrests six suspects in crypto-ransom judge kidnapping
Illegal activity accounts for only 1% of the total crypto transaction volume
On January 9, blockchain analytics firm Chainalysis reported that in 2025, illegal crypto addresses will receive at least $154 billion, with stable transactions accounting for 84% of stablecoins.
The FATF reiterated the statistics in its report, emphasizing the use of the stablecoin in illicit transactions.
Despite the increase in absolute dollar totals, illegal activity is a small share of total onchain volume, Chinalysis said.
In the same report Chinalysis illegal transactions are less than 1% of the total crypto transaction volume.
Magazine: Hong Kong Stable Coins in Q1, BitConnect Hijacking Arrests: Asia Express
