Crypto: Fatf Flags Stablecoin P2p Transfers As Sanctions Evasion Risk

The international watchdog says P2P stablecoin transfers via self-custody wallets can bypass AML checks and urges countries to assess risks and apply proportionate safeguards.

Peer-to-peer transfers made through self-custody crypto wallets are a key weak point in the stablecoin ecosystem because they can take place without a regulated intermediary, the Financial Action Task Force (FATF) said in a new report urging countries to tighten oversight as stablecoins spread into payments and cross-border transfers.

In its report on stablecoins, unhosted wallets and P2P transactions, the global anti-money laundering watchdog said transactions conducted directly between users through unhosted wallets can occur without regulated intermediaries such as exchanges or custodians.

The FATF said this structure can create gaps in Anti-Money Laundering (AML) oversight because the transactions occur outside the attention of entities required to monitor activity and report suspicious transfers. The report highlighted growing regulatory attention on stablecoins as their use expands across trading, payments and cross-border transfers.

The watchdog called on jurisdictions to assess the risks created by stablecoin arrangements and apply “proportionate” mitigation measures, which can include enhanced monitoring when self-custody wallets interact with regulated platforms and clearer AML and counterterrorism financing obligations for entities involved in issuing and distributing stablecoins.

The FATF said P2P transfers via self-custody wallets represent a “key vulnerability” because they can bypass AML controls typically enforced by regulated intermediaries.

These transfers occur directly between users without the involvement of virtual asset service providers (VASPs) or financial institutions subject to compliance obligations, limiting authorities’ ability to detect suspicious activity.

Related: Stablecoins, sanctions and surveillance: Why 2025 reshaped crypto’s regulatory reality

The FATF noted that transactions on public blockchains remain traceable because activity is recorded onchain. However, the pseudonymous nature of wallet addresses can make attribution more difficult.

Related: France arrests six suspects over crypto ransom kidnapping of magistrate

Source: CoinTelegraph