How Stablecoins Are Enabling Criminals to Launder Money and Evade Sanctions
Stablecoins, cryptocurrency tokens designed to maintain a stable value by pegging to fiat currencies, are increasingly under scrutiny for their role in enabling illicit financial activities, including money laundering and sanctions evasion. Despite recent U.S. legislation aimed at regulating stablecoins, loopholes and emerging techniques allow criminals and adversarial regimes worldwide to exploit these digital assets for illegal purposes.
Legislative Background and Regulatory Challenges
In July 2025, the U.S. Congress enacted the Guaranteeing Enforceable Necessary Inspections and Uniform Safeguards Act (GENIUS Act), which sets regulatory standards for stablecoin issuers and digital asset markets. However, experts and anti-corruption organizations argue that the bill falls short of closing critical loopholes that allow illicit use. Transparency International U.S. criticized the GENIUS Act for failing to embed commonsense anti-money laundering (AML) and sanctions evasion safeguards, thereby creating a blueprint that criminals and corrupt officials can exploit to use U.S. stablecoin infrastructure for illegal finance, corruption, and evasion of economic sanctions.
Exploiting Speed, Cross-Border Functionality, and Multi-Chain Transfers
Stablecoins’ technological qualities present unique challenges to law enforcement and regulatory bodies. Their fast transaction speed and ability to operate across multiple blockchain networks, such as Ethereum and Tron, enable bad actors to move illicit funds rapidly and obscure their trail. Cross-chain transfers disrupt the visibility and monitoring capabilities of traditional AML tools, creating compliance blind spots and accelerating laundering cycles compared to conventional systems.
Case Study: Garantex and Grinex Exchanges
A notable example is the Russian-based cryptocurrency exchange Garantex, sanctioned by the U.S. Department of the Treasury for laundering over $100 million linked to darknet markets and ransomware groups. After losing its license in Estonia in 2022 due to AML deficiencies, Garantex rebranded as Grinex in a bid to continue operations while evading sanctions. Investigations revealed that Grinex facilitated billions in transactions using a ruble-backed stablecoin (A7A5), demonstrating how quickly illicit actors adapt stablecoin infrastructure to circumvent law enforcement interventions.
Regulatory Efforts and Limitations
The GENIUS Act mandates that stablecoin issuers maintain robust sanctions compliance programs, including screening transactions against U.S. sanctions lists such as the OFAC Specially Designated Nationals (SDN) list. Foreign stablecoin issuers must operate from jurisdictions with comparable AML and sanctions controls, and the Treasury Secretary has authority to revoke authorization for issuers facilitating illicit finance.
However, industry analysts indicate that these measures provide regulatory discretion rather than strict requirements, leaving gaps that criminals exploit. The dynamic nature of digital assets and the complexity of cross-chain activity present ongoing challenges to AML/CFT (counter-financing of terrorism) enforcement.
Implications for Financial Institutions and Global Security
Financial institutions face increased risks as stablecoins grow in adoption globally. The possibility that stablecoins facilitate accelerated money laundering and sanctions evasion poses threats to global financial integrity and national security. Authorities warn that without enhanced international cooperation, improved technological surveillance, and stricter regulation, criminal networks will continue exploiting stablecoins with relative impunity.
As digital currencies evolve, harmonized policies incorporating real-time monitoring and cross-jurisdictional coordination remain essential to mitigating the misuse of stablecoins for illicit finance.