How stablecoins became a powerful tool for money launderers and sanctions dodgers

Criminal networks around the world have found a modern replacement for smuggled diamonds, suitcases of cash, and high-value artwork: stablecoins, the fast-moving digital tokens tied to the U.S. dollar.

Unlike traditional luxury assets used to hide wealth, stablecoins are easy to store, simple to move, and remarkably difficult for authorities to fully track. A review of blockchain records, online forums, and corporate filings shows just how quickly illicit money can slip through the cracks of global oversight.

A new favorite for criminal finance

Over the last decade, smugglers, drug traffickers, sanctioned elites, and extremist groups have turned to stablecoins to shift millions of dollars across borders. A February report from Chainalysis estimated that as much as $25 billion in illegal transactions last year involved these digital dollar tokens.

Because stablecoins sit outside the traditional banking system, they threaten one of Washington’s most effective foreign-policy levers: the ability to isolate adversaries from the dollar.

“Criminals are moving faster than ever before,” said Ari Redbord, a former Treasury Department official who now leads policy at blockchain analytics firm TRM Labs. When criminals can transfer large sums in seconds, he said, sanctions lose their bite.

A billion-dollar network uncovered

Governments are scrambling to keep up. In late November, British authorities arrested members of a sprawling money-laundering network that had purchased an entire bank in Kyrgyzstan to evade sanctions and move funds supporting Russia’s war effort.
 Their preferred tool? Tether — the world’s largest stablecoin.

These “cash-to-crypto” swaps, according to Britain’s National Crime Agency, have become embedded in global criminal operations.

Why stablecoins slip through the nets

For decades, the U.S. Treasury has forced banks to track suspicious transactions and block dealings with sanctioned individuals. Stablecoins circumvent this system entirely.

Through exchanges, mixers, unofficial brokers, and Telegram-based services, digital dollars can be:

• bought locally with cash,
  
  
• shifted between wallets without oversight,
  
  
• swapped across different tokens,
  
  
• mixed with other funds to obscure their origin, and
  
  
• eventually re-entered into traditional finance — sometimes through prepaid Visa or Mastercard products.
  
  

Redbord notes that this multi-step process makes tracing illicit flows significantly harder.

A test: How easily can stablecoins become spendable?

To see how accessible these pathways really are, the journalist behind the original reporting visited a crypto ATM in Weehawken, New Jersey, feeding in two $20 bills.

Within minutes, the stablecoins appeared in a digital wallet — and a Telegram bot walked the user through converting them into a Visa payment card that could be used almost anywhere, without providing an address or identity information.

These cards work like debit cards but offer far less scrutiny. The company behind the bot, WantToPay, specifically markets them to Russians who can no longer use U.S.-issued cards because of sanctions tied to the Ukraine war.

Online forums show hundreds of Russian-language reviews from users who rely on these cards to pay for services like Netflix, ChatGPT, and international online marketplaces.

After journalists contacted WantToPay, references to Visa and Mastercard vanished from its website, and the company announced it would stop issuing cards.

A web of intermediaries — and accountability gaps

The card issued in the experiment traced back not to WantToPay directly but to Dock, a Brazilian fintech company that helps businesses issue cards through traditional banks. Dock denied knowingly working with WantToPay and said it canceled suspicious cards.

This layered system — between card issuers, processors, fintech companies, and banks — creates oversight blind spots that criminals can exploit. And WantToPay is just one of many: at least two dozen firms worldwide advertise anonymous, stablecoin-funded Visa and Mastercard products with spending limits up to $30,000.

Regulators try to catch up

In July, President Trump signed the GENIUS Act, the first major U.S. law focused on stablecoins. It establishes new federal rules intended to strengthen compliance and prevent the exact types of abuses now being documented.

Circle, the issuer of USDC, welcomed the law, saying it marked a modernization of anti-money-laundering rules for the digital era. Circle and Tether both say they cooperate closely with law enforcement and emphasize that blockchain transactions, in many cases, are easier to trace than cash.

Tether says it has helped freeze more than $3.4 billion in illicit funds.

But the law applies mostly to U.S.-based institutions. Offshore platforms, unregulated stablecoins, and decentralized finance protocols remain largely outside U.S. reach — and much of the illicit activity takes place in these corners.

The complications around Tether

Tether, issuer of roughly $180 billion in tokens, is based in El Salvador and holds more than $112 billion in U.S. Treasuries. Any aggressive enforcement action could ripple into broader financial markets.

There are also political entanglements: Tether’s business is closely linked to entities associated with the family of Commerce Secretary Howard Lutnick. Cantor Fitzgerald — chaired by one of Lutnick’s sons — provides key services to Tether. Both the Commerce Department and Cantor Fitzgerald declined to comment on that relationship.

Even sanctions don’t always stop the flow

Attempts to stop offshore laundering networks have yielded mixed results.

A Kyrgyz company recently issued dollar-backed Visa and Mastercard products funded by a ruble-pegged stablecoin known as A7A5. Even after U.S. and European authorities sanctioned the token, the issuer, related banks, and a connected oligarch, the coin remained active.

And in the days before U.S. regulators froze the main exchange behind A7A5, the platform quietly shifted tens of millions worth of stablecoins into fresh wallets not yet flagged by authorities.