When stablecoin skeptics press the industry on what, exactly, are the benefits of the digital dollars, cross-border payments are typically one of the first answers.
Companies from FinTech startups to global payment processors see stablecoins as a way to move money internationally in seconds rather than days, often at a fraction of the cost of traditional banking rails.
On Tuesday (March 3), for example, Visa expanded its partnership with Stripe-owned stablecoin infrastructure platform Bridge to extend the global card issuance product they introduced last year to over 100 countries in Europe, Africa, the Middle East and Asia Pacific.
Yet the same attributes that make stablecoins attractive for legitimate commerce are increasingly appealing to criminals. Their price stability removes the speculative risk associated with other cryptocurrencies, while their global reach and 24-hour liquidity enable large sums to move across borders almost instantly.
A new report published Tuesday from the Financial Action Task Force (FATF) titled “Targeted Report on Stablecoins and Unhosted Wallets,” highlighted the growing tension between the technology’s promise of frictionless global payments and the risks posed by an ecosystem that remains only partially regulated.
For financial regulators, the result is a new payments infrastructure that can operate outside many of the controls built into the traditional financial system.
Read more: $154B in Illicit Crypto Flows Raises Stablecoin Questions
Fraudsters Wise Up to the Promise of Frictionless Global Money
Criminal groups have historically relied on cash, shell companies or informal networks such as hawala systems to move money across borders. Stablecoins offer similar capabilities in digital form, but with far greater scale and speed.
Blockchain transactions are recorded publicly, but identifying the individuals behind wallet addresses can be difficult without regulated intermediaries. When funds move directly between privately controlled wallets, known as “unhosted” wallets, those transactions can occur without the identity checks required by banks or regulated crypto platforms.
The crypto industry still hasn’t found a solution to prevent criminals from exploiting the technology, and until it does, expanding access without enhanced guardrails mostly expands harm.
That’s what Andrew Balthazor, associate and co-lead of the crypto asset disputes team at Holland and Knight LLP, told PYMNTS last month during a discussion for a recent “From the Block” podcast with PYMNTS CEO Karen Webster and Citi Global Head of Digital Assets for Treasury and Trade Solutions Ryan Rugg.
The FATF report pointed to peer-to-peer transfers between unhosted wallets as a growing vulnerability in the crypto ecosystem. These wallets allow users to store and transfer digital assets without relying on exchanges or custodial services. While they are a central feature of decentralized finance and personal asset control, they also make it possible for funds to bypass the compliance systems that regulated financial institutions employ.
One critical area of focus for regulators is the role of stablecoin issuers themselves. Many stablecoins are managed by organizations that control key functions such as minting new tokens, managing reserves or facilitating redemptions.
The stablecoin issuer Tether, for example, has reportedly frozen $3.5 billion of its stablecoins since 2023 and a total of $4.2 billion since the company’s launch, in cases where the tokens were linked to illicit activity.
The company highlighted cases in 2025 in which it worked with U.S. and other authorities to freeze funds tied to terrorism financing, money laundering, “pig butchering” scams, a sanctioned exchange and a transnational scam network.
Still, the FATF report argued that gaps in global regulation have allowed illicit actors to route transactions through countries where oversight is weaker. Stablecoins can move seamlessly between exchanges and wallets in different jurisdictions, meaning criminals need only find one point in the system where compliance standards are insufficient.
See also: Crypto Meets the Fed’s Core Payments System
A Payment Innovation With Global Stakes
Despite the risks, regulators and policymakers generally acknowledge that stablecoins offer genuine benefits. Faster and cheaper cross-border payments could expand financial access, particularly in emerging markets where traditional banking services are limited. For multinational companies, stablecoin-based settlement could reduce the costs and delays associated with international transfers.
“The real opportunity isn’t about chasing the buzzwords, but it’s more about being disciplined, identifying where stablecoins truly outperform a so-called legacy payment system,” Bryce Jurss, vice president, head of Americas, digital assets at Nuvei, told PYMNTS in September.
The challenge is ensuring that the infrastructure supporting these payments evolves with appropriate safeguards. Findings in the “2025 State of Fraud and Financial Crime in the United States” report, produced by PYMNTS Intelligence in collaboration with Block, show that 68% of financial institutions increased fraud-detection spending year over year, while 46% report rising sophistication in fraud schemes.
After all, the financial crime landscape more broadly is evolving at a rapid clip thanks to technological advances and an increasingly borderless commerce and financial ecosystem. Stablecoins are just one thread in a bigger tapestry.
