FATF Report on Stablecoin and Unhosted Wallet Risks

JD Supra Trade Law

Published March 11th, 2026

Detected March 12th, 2026

Summary

The Financial Action Task Force (FATF) has released a report detailing risks associated with stablecoins and unhosted wallets for money laundering and terrorist financing. It provides recommendations and good practices for jurisdictions and the private sector to mitigate these risks.

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What changed

The Financial Action Task Force (FATF) has issued a targeted report identifying money laundering (ML), terrorist financing (TF), and proliferation financing (PF) risks and vulnerabilities related to stablecoins and unhosted wallets, particularly in peer-to-peer transactions. The report urges jurisdictions to recognize specific ML/TF/PF risks associated with stablecoins and implement proportionate, effective mitigating measures, recommending the application of Recommendation 15 to all relevant entities in stablecoin arrangements.

Key recommendations include requiring stablecoin issuers to adopt risk-based controls, developing strong technical capabilities within supervisory and law enforcement authorities, and establishing public-private partnerships. Jurisdictions and private sector entities involved in stablecoins should review their existing frameworks and implement measures such as customer due diligence, allowlisting/denylisting, and enhanced monitoring to address the identified risks.

What to do next

Review FATF report for stablecoin and unhosted wallet risks.
Assess current AML/TF/PF controls for stablecoin arrangements.
Consider implementing recommended risk-based technical and governance controls.

Source document (simplified)

March 11, 2026

FATF Targeted Report On Stablecoins And Unhosted Wallets

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The Financial Action Task Force (FATF) has issued a targeted report setting out the money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risks and vulnerabilities related to stablecoins and unhosted wallets, particularly during peer-to-peer (P2P) transactions. In addition, the report identifies and shares a range of good practices that could be implemented by jurisdictions and the private sector to mitigate these risks and makes recommendations for implementation.

The report highlights that only a limited number of jurisdictions have implemented targeted regulatory frameworks for entities operating within the stablecoins ecosystem, explicitly taking into account the features that distinguish stablecoins from other virtual assets. While the FATF Standards do not require jurisdictions to adopt regulatory frameworks for stablecoin arrangements beyond those already applicable to virtual asset service providers, the FATF urges countries to recognise the specific ML/TF/PF risks associated with stablecoins and to implement proportionate and effective mitigating measures that reflect their distinct characteristics.

FATF recommends that jurisdictions should apply Recommendation 15 to all relevant entities involved in stablecoin arrangements, ensuring that they are subject to clear, enforceable ML/TF obligations. Jurisdictions should also define the roles and responsibilities of all participants throughout the stablecoin ecosystem and impose appropriate ML/TF obligations using a risk-based approach.

Other key good practices and recommendations include:

Requiring stablecoin issuers to adopt risk based technical and governance controls, such as the ability to freeze, burn or withdraw stablecoins in the secondary market, conduct customer due diligence at redemption and, where appropriate, implement smart contract controls, such as allowlisting (restricting transactions to pre-approved addresses) and denylisting (blocking transactions involving high-risk addresses).
Developing strong technical capabilities within supervisory and law enforcement authorities, including expertise in smart contract functionalities, cross-chain transaction mechanics, blockchain analytics tools and monitoring risks from P2P transactions via unhosted wallets.
Ensuring competent authorities have the tools and legal frameworks necessary for swift domestic and international cooperation that enable rapid information exchange, particularly in cases involving freezing or burning of stablecoins.
Establishing public private partnerships to strengthen cooperation on typologies, risk indicators and emerging threats, as well as more tactical partnerships for investigations. [View source.]

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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