The Financial Action Task Force (FATF) has issued a new alert on the rapidly evolving risks facing global cryptocurrency markets, emphasizing that while the legal framework for virtual assets is growing, the actual enforcement of these measures continues to lag behind. In its seventh report card, published on July 16, FATF assessed global compliance with its recommendations for combating money laundering and terrorist financing in the crypto sector.
Compliance Outpaces Enforcement
Chainalysis, a blockchain analytics company, reported that 86% of the 147 jurisdictions surveyed have completed virtual asset risk assessments, a significant increase from 76% in 2025. Additionally, 83% of these regions are now covered by “Travel Rule” legislation, compared to 73% one year earlier. The proportion of jurisdictions rated “Largely Compliant” has also risen from 29% to 34% over the past year.
Among 95 jurisdictions that require licensing for Virtual Asset Service Providers (VASPs), 81% have conducted supervisory inspections and 71% have taken enforcement action. However, 60% of locations with Travel Rule laws have not undertaken supervisory or enforcement actions, reflecting a persistent enforcement gap.
FATF evaluated preventive measures targeting anti-money laundering (AML) and countering the financing of terrorism (CFT) and found that only 13 of the 139 jurisdictions fully met its standards—a figure below 10%. Licensing requirements also show shortcomings: while 73% of jurisdictions mandate VASP licensing, only 58% have actually approved licenses and just 40% adequately meet the necessary criteria during mutual evaluations.
Another concern is the growing preference for prohibition over action. The report identifies that 23% of jurisdictions now ban VASPs, up from 11% in 2023, yet these bans are not matched by more robust enforcement.
The FATF’s latest findings suggest that while countries are establishing more crypto laws, coordinated and effective enforcement still trails, especially as criminals take advantage of technological advances such as artificial intelligence and “freeze-resistant” stablecoins to circumvent controls. Paper compliance, the report suggests, is no longer sufficient.
| Metric | 2023 (%) | 2025 (%) | 2026 (%) |
|---|---|---|---|
| Virtual asset risk assessments completed | – | 76 | 86 |
| Travel Rule legislation coverage | 73 | – | 83 |
| Jurisdictions banning VASPs | 11 | – | 23 |
| VASPs requiring licensing | – | – | 73 |
| VASPs licensed | – | – | 58 |
Freeze-Resistant Stablecoins and Criminal Innovation
The FATF highlighted a notable case involving a Cambodia-based conglomerate, which laundered more than $4 billion between August 2021 and January 2025 through a network of organized fraud, underground banking, and blockchain transactions, as tracked by Chainalysis. At least $37 million of this sum was traced to cyberattacks attributed to DPRK-affiliated groups supporting weapons programs.
The report reveals that after a major stablecoin issuer froze over $29 million of the group’s assets, the organization responded by creating its own USD-pegged token. The new token, marketed as immune to freezes, was deployed across multiple public blockchains and a proprietary chain.
FATF cautioned that the ability for authorities to freeze or burn assets at the issuer level can no longer be assumed. The watchdog also observed that terrorist organizations such as ISIL and Al-Qaeda increasingly rely on stablecoins, rather than Bitcoin, to transfer and raise funds. According to Chainalysis, stablecoins now represent 84% of all illicit transaction volumes within the crypto industry.
Mini dictionary: FATF (Financial Action Task Force) is an intergovernmental organization that sets global standards for preventing money laundering and terrorism financing, including in cryptocurrency markets.
AI and DeFi Present Ongoing Challenges
According to the FATF report, artificial intelligence has become a powerful tool, boosting the effectiveness of money laundering, terrorist finance, and sanctions evasion activities. Notable cases referenced include deepfake-based recruitment scams that netted over $1 million, the use of AI for developing smart-contract exploits, and leveraging open-source models to bypass restrictions on commercial AI platforms.
Chainalysis noted that AI-driven impersonation scams registered the fastest growth among crypto-related fraud in the past year. Meanwhile, decentralized finance (DeFi) structures remain another major concern: the FATF found that 93% of countries have not yet identified or regulated qualifying DeFi arrangements that might require oversight under VASP rules.
The FATF emphasized that the rise of offshore VASPs, which actively offer services to global customers and advise using VPNs to avoid detection, continues to complicate supervisory efforts. As part of future compliance expectations, best practices now include blockchain analytics, wallet screening, and blacklisting tools in AML and CFT frameworks.
Mini dictionary: VASP (Virtual Asset Service Provider) refers to businesses or platforms that facilitate the transfer, exchange, or safekeeping of digital assets, and are subject to regulatory oversight regarding AML and CFT standards.
New compliance standards outlined by the FATF signal rising expectations for blockchain monitoring, wallet screening, and strict blacklisting, while acknowledging that decentralized models and technological advancements like AI require regulators to keep adapting.
