Stablecoins were originally designed as a simple and rapid connection between fiat currencies and digital assets, offering low volatility for payments, cross-border transfers, and financial inclusion.
However, the latest statistics indicate that they have become the primary vehicle for illicit activity in the crypto ecosystem, even surpassing Bitcoin, implying a near-inevitable path to criminality.
According to the latest annual report from Chainalysis, stablecoins accounted for 63% of the entire cryptocurrency transaction volume related to illicit activity in 2024. With most stablecoins pegged to the U.S. dollar or tied to the dollar index, they do not experience the price fluctuations associated with other cryptocurrencies.
The total amount received by the illegal addresses in 2024 was at least $40.9 billion, with the figure potentially rising to around $51 billion as more wallets are being discovered. This shift marks a significant departure from Bitcoin’s previous position as the preferred medium for unscrupulous transfers.
The question that arises is why stablecoins are now commonly used for illegal operations, and there are several characteristics that render them particularly suited for unlawful activities. To begin with, their pegged value results in lower volatility compared to regular cryptocurrencies, which is an important consideration when absconders want to hide and transfer their valuables in a safe manner.
Secondly, stablecoins benefit from deep liquidity across various exchanges and platforms, allowing for quick transfers and conversions of the coins.
Thirdly, the design of many stablecoin systems — with their programmable, pseudonymous blockchain transfers — enables layering, obscuring, and cross-border movement with fewer intermediaries than traditional banking routes. This combination of attributes has led to a “perfect storm” for illegal use.
What began as an effort to increase the efficiency and stability of cryptocurrency payments has now become the fate of speculative cryptocurrencies — tools repurposed for money laundering, sanctions evasion, fraud, and ransomware. One thing that stands out is the shift from Bitcoin, a dominant cryptocurrency, as visible on the crypto heatmap, to stablecoins among criminal networks, illustrating the changing landscape of crypto crime.
The situation illustrates the far-reaching repercussions. The transition to stablecoins has made it urgent for regulators to rethink their existing modes of operation; the frameworks that have so far been developed around the history of Bitcoin might not be able to effectively deal with a payment rail that is completely dependent on the vast circulation of privately issued tokens.
The issuers and platforms will have to bear the brunt of their reputational risk, as it is now widely perceived that stablecoins are the most trusted and preferred channel for transactions flowing in and out.
The original vision of stablecoins as a means of payment that is less complicated and more inclusive is gradually giving way to their perception as the channels of illicit finance in the eyes of legitimate users and jurisdictions.
However, it is essential to emphasize that this does not imply that all stablecoin transactions are illegal — far from it. According to Chainalysis, illegal transactions account for approximately 0.14% of the overall on-chain volume.
Still, the proportion of illicit flows within the stablecoin segment remains significant, underscoring a structural vulnerability: any tool that offers ease, stability, and the movement of value across borders will inevitably attract criminal exploitation if governance and oversight are inadequate.
In a nutshell, the fate of stablecoins is predetermined: what was meant to be an unproblematic interface between fiat and crypto has turned into the primary channel for illicit value transfer.
Unless governance, transparency, regulation, and controls are drastically improved, stablecoins may still follow the same path as speculative cryptocurrencies, which were initially praised for their utility but later condemned for their misuse.
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