Stablecoins Facilitate Money Laundering and Sanctions Evasion, Raising Regulatory Concerns
Stablecoins, digital assets designed to maintain a stable value against traditional currencies, have emerged as a powerful tool in the cryptocurrency market. However, their speed, cross-border functionality, and multi-blockchain usage are increasingly exploited by criminals to launder money and evade sanctions, drawing criticism and concern from regulators and watchdogs.
New Legislation and Regulatory Gaps
In July 2025, the Guaranteeing Enforceable Necessary Inspections and Uniform Safeguards Act (GENIUS Act) was signed into law, aiming to establish regulatory standards for stablecoin issuers in the United States. While the Act includes provisions requiring stablecoin issuers to comply with money laundering (AML) and counter-terrorist financing (CFT) measures, as well as sanctions compliance programs, experts argue it leaves significant loopholes that criminals can exploit.
Transparency International U.S. highlighted that failure to incorporate stringent anti-money laundering and anti-sanctions evasion safeguards creates a blueprint for illicit actors—including corrupt officials and adversarial regimes—to misuse stablecoins within the U.S. financial system. This risks transforming the U.S. digital dollar ecosystem into a haven for illicit finance activities.[1]
Mechanisms of Crime using Stablecoins
Stablecoins’ ability to operate across multiple blockchain networks—such as Ethereum and Tron—enables criminals to conduct “cross-chain laundering,” moving illicit funds through these chains to obscure transaction trails. This multi-blockchain availability creates significant enforcement blind spots where traditional crypto-monitoring tools lose visibility, complicating investigations and compliance efforts.[3]
Furthermore, the rapid transaction speed and borderless nature of stablecoins allow illicit actors to swiftly complete money laundering cycles and evade sanctions more effectively than through traditional financial systems. Criminals take advantage of jurisdictional gaps in oversight to convert and move illicit funds without detection.[3]
Real-World Examples: Garantex and Grinex
Concrete cases illustrate these concerns. The U.S. Department of the Treasury sanctioned the Russian-based cryptocurrency exchange Garantex and its associated entity Grinex for laundering billions of dollars linked to sanctions evasion and ransomware attacks. Garantex, originally registered in Estonia but operating largely from Russia, was found to have facilitated over $100 million in illegal transactions and had previously lost its license due to anti-money laundering deficiencies. After sanctions and enforcement actions, Garantex employees created Grinex to continue illicit activities, demonstrating the adaptability of criminals leveraging digital assets for sanction evasion.[4][5]
Regulatory Responses and Challenges
The GENIUS Act requires stablecoin issuers to establish sanctions compliance programs that screen transactions against U.S. sanctions lists such as the OFAC Specially Designated Nationals (SDN) list. It also empowers the Treasury Secretary to revoke foreign stablecoin issuers’ registration if they are found facilitating money laundering or sanctions evasion. Additionally, issuers must maintain the ability to freeze stablecoin assets once sanctions are imposed.[2]
Yet, critics argue that these provisions are insufficiently robust. Crucially, the Act does not require prior notice to issuers before regulatory action, and enforcement is at the discretion of regulators, potentially limiting proactive prevention. The cross-chain nature of stablecoins still poses technical and legal challenges for effective monitoring across all transaction layers.[1][3]
Implications for the Financial Ecosystem
As stablecoins grow in popularity and use, their potential abuse has raised alarm among financial institutions and regulators. The fast-paced nature of these assets and their susceptibility to abuse underscore the need for enhanced AML oversight, sophisticated transaction monitoring technologies, and international coordination to close regulatory gaps. Without comprehensive safeguards, stablecoins may continue to facilitate illicit finance while complicating efforts to impose meaningful sanctions and combat corruption.
Stakeholders emphasize that while stablecoins hold promising benefits for efficient payments and financial inclusion, addressing their misuse is crucial to protect the integrity of the global financial system.