The Financial Action Task Force (FATF) has identified peer-to-peer (P2P) transfers of stablecoins as a significant money laundering risk in its latest report. The global anti-money laundering body emphasized that transactions through unhosted wallets, lacking regulated intermediaries, complicate tracing and regulation. Stablecoins, particularly Tether (USDT) and USD Coin (USDC), are now the most used virtual assets in illegal crypto activities, with 84% of the $154 billion in illicit transactions in 2025 involving these assets, according to Chainalysis. The FATF recommends that jurisdictions enforce technical capabilities for stablecoin issuers to freeze or blacklist suspicious assets and integrate compliance features like allow-lists in smart contracts. The report also highlights the use of stablecoins by North Korea-linked hackers and Iran-associated entities for laundering cybercrime proceeds. The FATF calls for stricter regulation of stablecoin issuers and broader adoption of blockchain analysis tools and anti-money laundering measures, including the Travel Rule, across the crypto industry.