By Rezaul Karim, 3 March 2025
Stablecoins, once overshadowed by Bitcoin in the realm of illicit finance, have surged to the forefront of crypto-based crime. A recent report from blockchain data firm Chainalysis reveals that these dollar-pegged digital tokens accounted for 63% of illicit transaction volumes in 2024 – an unprecedented leap that signals a sea change in the criminal underbelly of cryptocurrency.
The shift has been swift and global, raising critical questions about why stablecoins have become the favoured tool of scammers, money launderers, and even sanctioned entities seeking to skirt traditional financial controls.
But what is behind this alarming trend? What is fuelling it, where is it most prevalent, when did it gain momentum, and why are stablecoins suddenly eclipsing Bitcoin in criminal circles? Drawing on Chainalysis’s latest data and other recent findings, we can identify how stablecoins have evolved into an indispensable yet risky instrument for both legitimate users and malign actors.
Eye-opening statistics
Until recently, Bitcoin was synonymous with crypto crime, valued for its deep liquidity and ubiquitous exchange listings. However, Chainalysis’s 2025 Crypto Crime report underscores a major turning point last year. [1]
- Illicit addresses received $40.9 billion in cryptocurrency in 2024, a figure Chainalysis projects could top $51 billion once additional criminal wallets are identified.
- Stablecoins comprised 63% of all illicit transactions, up from significantly smaller shares in prior years.
- Across the global cryptocurrency market, stablecoins also saw a 77% increase in legitimate usage, hinting that criminals are simply following the mainstream trend toward these less volatile digital assets, as the figure above shows.
While illicit transactions still constitute a small fraction – around 0.14% – of overall on-chain activity, the absolute dollar amounts are staggering. ‘Stablecoins now occupy the majority of all illicit transaction volume,’ stated a Chainalysis spokesperson. ‘That reflects the broader ecosystem’s pivot to stable, dollar-pegged tokens.’
Early in 2024, the United Nations Office of Drugs and Crime (UNODC) reported [2] on how Tether (currency code USDT), a type of stablecoin on the TRON blockchain had become a preferred vehicle for cyber fraud, money laundering, and illegal gambling. This perspective aligns with the surge in stablecoin usage noted by Chainalysis, reinforcing the recent findings that:
- Criminals value Tether’s price stability, ease of use, and minimal fees.
- TRON-based Tether transfers often provide faster, cheaper cross-border transactions than Bitcoin, making them ideal for high volume illicit flows.
- Anonymity and accessibility appeal to money launderers setting up large scale operations or seeking to conceal their origins in heavily monitored jurisdictions.
UNODC’s report further revealed that illicit operators gravitate toward Tether for the same reasons law abiding users do: convenience and reliability. These dual qualities, ironically, have made stablecoins both a key pillar in decentralised finance, and a potent instrument for criminals.
Freezing efforts
Tether Holdings, the company responsible for issuing USDT, has long faced scrutiny over whether its stablecoin contributes to financial crimes. Company representatives stress that they ‘proactively collaborate with global law enforcement agencies’, freezing addresses linked to terrorism financing, child exploitation, or major fraud campaigns. According to Tether, these efforts have resulted in the freezing of $835 million in funds deemed tied to illicit activities since the company’s launch in 2014.[3]
Despite these measures, critics argue that criminals often remain a step ahead – shuffling funds quickly across multiple wallets and swapping tokens through decentralised exchanges before Tether can act. Still, Tether’s willingness to clamp down on bad actors highlights the paradox of centralised stablecoins: their issuers can intervene in ways that purely decentralised cryptocurrencies cannot, yet that very capacity also raises questions about centralisation and oversight.
Proactive measures to regulate
In the Middle East, the Central Bank of the United Arab Emirates (UAE) is taking proactive measures to regulate stablecoin usage. Its payment token services regulation, introduced in July 2024, bans the acceptance of USDT, Binance USD, and other non-dirham-backed stablecoins for goods and services – at least in onshore jurisdictions. This policy shift underscores an attempt to contain potential abuses of dollar-pegged stablecoins in everyday commerce.
Chainalysis notes that stablecoins account for 51% of all crypto activity in the UAE, topping Bitcoin’s 19% and Ether’s 9% [4]. While the new regulation directs merchants to accept only dirham-backed tokens, experts question whether criminals will circumvent these rules by using less regulated peer-to-peer marketplaces, or by routing funds through financial free zones.
Why do criminals prefer stablecoins?
Industry observers trace the criminal pivot to stablecoins to several key factors. According to Arun Leslie John, Chief Market Analyst at Century Financial, criminals value USDT and other stablecoins for the same reason legitimate traders do.
Chainalysis points out that stablecoin transfers typically offer smaller fees and quicker confirmations, especially on networks like TRON. This efficiency is appealing to cybercriminals juggling high transaction volumes.
Furthermore, stablecoins offer the highest number of currency pairs across almost any exchange globally, often with significant liquidity. This liquidity speeds up the process of money laundering, allowing criminals to cash out or pivot to other tokens without incurring major slippage.
Chainalysis identified high stablecoin usage in sanctioned jurisdictions like Iran and Russia, particularly on local exchanges such as Nobitex and Garantex. By tapping into digital dollar-like tokens, entities under sanctions can bypass traditional banking walls.
Final thoughts
While stablecoins’ convenience and liquidity have made them a backbone in legitimate finance, these same attributes have now become magnets for criminals seeking swift, low fee, and less volatile transactions. Regulators, issuers, and law enforcement must strike a delicate balance between fostering innovation and ensuring robust safeguards. Only then can the crypto ecosystem maintain its promise, while curbing stablecoins’ newfound role as a conduit for financial crime.
About the author
Rezaul Karim, Advisory Board Member at Compliance Week, is a financial crime compliance expert with over a decade of experience. He has held multiple compliance assistant vice president roles at HSBC and is a published author, speaker, and thought leader.