FATF Warns of Crypto Crime Surge, Urges Nations to Strengthen Regulation

The Financial Action Task Force (FATF), the global standard-setter for financial crime policy, has urged governments worldwide to ramp up efforts in regulating crypto assets amid mounting concerns over their use in illicit financial activities.

In a report released Thursday, the Paris-based watchdog warned that insufficient regulatory action in the crypto sector could expose the global financial system to serious risks. While FATF noted some progress in implementing its virtual asset guidelines, compliance remains limited. As of April 2025, just 40 of 138 assessed jurisdictions were found to be “largely compliant” with FATF's crypto regulations—an improvement from 32 in 2024, but still far from sufficient.

Crypto Crime Continues to Surge

According to data from blockchain analytics firm Chainalysis, crypto wallets linked to illegal activity may have received as much as $51 billion in 2024 alone. The FATF report highlights ongoing challenges governments face in tracing and verifying identities behind virtual asset transactions—an issue that directly hinders enforcement actions.

The organization emphasized that stablecoins, digital tokens pegged to fiat currencies, are increasingly being exploited by bad actors. These include terrorist financiers, drug trafficking networks, and state-backed cybercriminals—most notably North Korea, which has been implicated in a number of high-profile crypto heists.

In one of the most alarming cases, the FBI reported that North Korean hackers were behind a $1.5 billion theft from crypto exchange ByBit in February 2024, marking the largest-ever digital asset theft recorded. North Korea has consistently denied any involvement in cybercrimes.

Global Regulators Sound the Alarm

FATF's findings align with warnings from other major financial regulators. In April, the European Union's securities watchdog issued its own alert, cautioning that the fast-growing crypto industry could pose risks to overall market stability—especially as it becomes more interconnected with traditional finance.

Despite the clear threat, enforcement and compliance remain uneven across global markets. FATF called on member nations to fully implement the "travel rule", which requires crypto firms to collect and share sender and recipient information on digital asset transfers—an essential measure for cracking down on money laundering and terrorist financing.

Also Read: Crypto Hacking Thefts Surge to $1.4 Billion in First Half of 2024