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.

Frequently Asked Questions

Why have stablecoins become the main choice for illegal crypto activity?

Stablecoins are now favored by criminals due to their stable value, unlike Bitcoin. This low volatility is important when users want to hide and move their money safely. Stablecoins also offer fast transfers and deep liquidity across many exchanges, making them quick to move across borders with fewer checkpoints than banks.

Did Bitcoin use to be the number one choice for crypto crime?

Yes, the article clearly shows that Bitcoin was once the most common currency for illegal transfers. The recent data, however, illustrates a significant shift. Stablecoins now account for 63% of the entire cryptocurrency transaction volume related to illicit activity in 2024.

What percentage of all stablecoin transactions are actually illegal?

It is important to understand that nearly all stablecoin use is legal. Illegal transactions currently account for only about 0.14% of the overall on-chain volume. However, the high total dollar amount and the recent sudden shift towards stablecoins for crime are causing worry.

Why does the shift to stablecoins mean regulators must rethink their rules?

Regulators have created their current rules mostly based on the history and structure of Bitcoin. Stablecoins are much different, as they act as a stable payment system dependent on privately issued tokens. This new structure requires completely different controls and oversight models to be truly effective.

What are the main features of stablecoins that make them attractive to criminals?

Criminals are drawn to stablecoins for three main reasons. First, their pegged value makes them resistant to large price changes. Second, their deep liquidity allows for quick and easy exchange. Third, the systems allow for pseudonymous, cross-border transfers that help hide the money’s origins.

Will the increased use of stablecoins for crime affect their legitimacy for everyday users?

Yes, the increase in illegal use carries a big reputational risk. It can change the way legitimate users and various jurisdictions view stablecoins. The original purpose of stablecoins as a simple, safe payment method is being overshadowed by their new reputation as channels for illicit finance.

What are some specific types of illegal activity where stablecoins are now being used?

Stablecoins are being repurposed and used for several unlawful activities. These include common financial crimes like money laundering and sanctions evasion. They are also being used to carry out fraud and as the payment method for ransomware attacks by criminal groups.

Is it a misconception that all stablecoins are poorly governed?

It is a misconception to think all stablecoin issuers lack proper oversight. The article suggests that any tool offering such ease and stability will attract criminals if governance is weak. Therefore, responsible investors should prioritize stablecoins whose issuers demonstrate strong transparency, controls, and active compliance to reduce risk.

What is the most immediate, actionable step stablecoin issuers and platforms should take?

Issuers and platforms must drastically improve their governance, transparency, and internal controls right away. The market widely views them as the preferred channel for illegal transactions, meaning they must quickly fix these structural vulnerabilities to improve their brand reputation.

How do stablecoins allow criminals to obscure and hide their money?

The design of many stablecoin systems comes with programmable, pseudonym-based blockchain transfers. This design allows for a process called “layering,” which helps criminals hide the true source and destination of their funds. It also makes moving money across international borders much faster than traditional banking.