Illicit crypto flows hit $154bn as stablecoins move to the fore

The rapid ascent of stablecoins as a pillar of digital finance is now intersecting with a more troubling statistic: illicit cryptocurrency flows reached an estimated $154bn in 2025, the highest level on record.

Illicit Crypto Flows Hit $154bn 

According to data from Chainalysis, that figure represents a dramatic year-on-year increase, with stablecoins accounting for approximately 84 per cent of illicit transaction volume.

The shift marks a profound change in the architecture of crypto-related crime. In 2020, Bitcoin dominated unlawful flows.

By 2025, stablecoins — designed to mirror the value of fiat currencies, typically the US dollar — had become the preferred instrument.

Their lower volatility, high liquidity and global acceptance have made them attractive not only to legitimate businesses but also to sanctioned entities and criminal networks.

The report characterises the current period as a third wave in the evolution of crypto crime: from early rogue actors, to professionalised cybercriminal organisations, and now to nation-state involvement at scale.

A 694 per cent spike in funds directed to sanctioned entities underscores the geopolitical dimension of this transformation.

Frictionless Architecture, Regulatory Friction

At the heart of the debate lies a structural paradox. Stablecoins promise efficiency — programmable dollars that can move peer-to-peer in minutes, without correspondent banking chains or settlement windows.

For firms operating across emerging markets, this architecture can reduce costs and mitigate currency instability.

Yet that same architecture can create what compliance specialists describe as a “regulatory air gap”.

While exchanges and regulated issuers perform know-your-customer checks at the point of fiat conversion, transfers between self-hosted wallets often occur beyond the perimeter of traditional financial oversight.

Unlike the Swift network or correspondent banks, there is no single chokepoint through which authorities can reliably intervene.

Recent enforcement cases highlight the risk. Billions of dollars in digital assets have reportedly flowed through wallets linked to sanctioned actors in jurisdictions such as Iran and Russia.

North Korean-linked groups were responsible for record-breaking crypto thefts, while state-backed stablecoin projects have emerged explicitly to facilitate sanctions circumvention.

The data does not imply that blockchain finance has become inherently more criminal. Rather, as analysts note, it has become more geopolitically relevant.

When nation-states adopt the same infrastructure originally developed by cybercriminals, the stakes extend beyond consumer fraud to national security.

The Stablecoin Dilemma for Policymakers and Institutions

For institutional stakeholders evaluating stablecoin strategies, the central question is no longer whether the technology works. In many cross-border contexts, it clearly does.

The deeper issue is whether its efficiency derives partly from the absence of regulatory friction — and what happens when that gap closes.

If stablecoins become subject to bank-equivalent compliance obligations, including comprehensive identity verification and transaction monitoring, some of their cost and speed advantages may diminish.

Conversely, leaving them structurally outside those frameworks risks entrenching parallel payment systems that complicate sanctions enforcement and anti-money laundering regimes.

The future of stablecoin adoption may therefore hinge less on technological innovation and more on regulatory clarity. As oversight frameworks evolve, the sector faces a defining test: can programmable dollars retain their efficiency while integrating robust guardrails?

The answer will shape not only the next phase of blockchain finance, but also the integrity of the global payments system itself.