Key takeaway: Regulatory frameworks for stablecoins are now in place across major jurisdictions. Issuers must implement AML/CFT controls and monitor both direct customer activity and their broader token ecosystem. Financial institutions serving issuers need due diligence frameworks that account for on-chain activity.
Regulatory frameworks for stablecoins are no longer hypothetical. The US, EU, Hong Kong and other major markets have established specific operational standards for stablecoin issuers, with AML/CFT measures at their core. These include performing know your customer (KYC) checks, conducting due diligence on VASP counterparties, ensuring Travel Rule compliance and undertaking ongoing risk-based monitoring of customers’ on-chain transactions.
The FATF has indicated that issuers “are in a unique position to undertake financial crime risk mitigation, as they determine the functions of the so-called stablecoin, who can access the arrangement and whether AML/CFT preventive measures are built into the arrangement.” This positioning emphasizes that issuers play a central role in shaping AML/CFT controls within stablecoin arrangements.
Regulatory guidance indicates that issuers need two monitoring capabilities: direct customer transactions and the wider token ecosystem. For direct customer monitoring, issuers’ obligations mirror those of other regulated entities like cryptoasset exchanges. They must demonstrate due diligence when entering business relationships and identify when customers’ on-chain activity deviates from normal patterns or includes indicators of prohibited activity.
Ecosystem monitoring is where stablecoin compliance diverges from traditional financial services. Regulators expect issuers to understand risks across their broader token network, beyond interactions with direct customers. The Hong Kong Monetary Authority notes that an issuer has a responsibility for maintaining effective functioning of its stablecoins and guarding against the risk of their misuse for unlawful purposes, and that ongoing monitoring of stablecoins in circulation is crucial for the licensee to discharge its AML/CFT responsibilities.
Banks that partner with or provide services to stablecoin issuers must identify and manage the financial crime risks these relationships present. Whether providing operating accounts, reserve management services or client settlement accounts, financial institutions need appropriate due diligence frameworks.
In September 2025, the Wolfsberg Group released guidance on banking services for fiat-backed stablecoin issuers. The guidance makes clear that banks can draw upon existing compliance arrangements and leverage established standards for managing correspondent banking risks. Wolfsberg also indicates that blockchain-based transactional information can help banks identify whether an issuer operates in line with its expected risk profile, even when the bank’s services are limited to fiat currency accounts.
Compliance teams don’t need to build frameworks from scratch. Established financial crime risk management principles apply directly to stablecoins, and blockchain monitoring solutions provide the visibility needed to detect and prevent illicit activity on chain.
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