The Financial Action Task Force (FATF), the global body overseeing anti-money laundering efforts, has issued a stark warning about the growing threat of illicit finance fueled by cryptocurrencies. In its latest targeted update, the FATF revealed that virtual assets (VAs) and their service providers (VASPs) continue to pose serious risks to global financial stability if not properly regulated.

Released on Thursday, the sixth update on AML/CFT compliance highlights both progress and setbacks in the global fight against financial crimes in the virtual asset space. The report identifies several key areas of concern, including the abuse of stablecoins, the rise in fraud and scams, regulatory delays, and insufficient international cooperation.

According to the FATF, without swift and widespread enforcement of its guidelines, the global financial system could face dire consequences.

Stablecoins Emerge as High-Risk Tools for Crime

A central focus of the FATF’s warning is the growing misuse of stablecoins—cryptocurrencies typically pegged to fiat currencies like the U.S. dollar. These assets, while designed for transactional stability, have increasingly been weaponized for illegal purposes such as money laundering, cybercrime, and terrorist financing.

In 2024 alone, stablecoins accounted for a significant share of on-chain illicit activity, with criminal networks taking advantage of their liquidity and ease of cross-border transfers. The FATF report cites that many of the largest fraud and laundering cases this year have involved stablecoins, positioning them as a key threat that regulators must prioritize.

DPRK Behind Largest Crypto Theft in History

Among the most alarming revelations in the FATF’s report is a massive cyber heist perpetrated by actors from the Democratic People’s Republic of Korea (DPRK). In what is now the biggest virtual asset theft on record, North Korean-linked hackers stole $1.46 billion from cryptocurrency exchange ByBit.

This high-profile attack underscores the urgent need for better global security frameworks and international cooperation. Only 3.8% of the stolen funds have been recovered, highlighting significant challenges in tracing assets and prosecuting perpetrators in decentralized finance.

The FATF stressed that this case illustrates how a single point of failure in one jurisdiction can ripple across global markets, given the inherently borderless nature of cryptocurrencies.

Illicit On-Chain Activity Reaches $51 Billion in 2024

Beyond high-profile hacks, the report reveals a staggering volume of fraud, scams, and illicit activity in the crypto sector. According to an industry estimate cited by the FATF, $51 billion worth of on-chain activity in 2024 was linked to illegal schemes—ranging from Ponzi-style fraud to phishing attacks and impersonation scams.

These findings reflect a troubling surge in criminal exploitation of digital assets, especially among unregulated platforms or loosely monitored peer-to-peer (P2P) ecosystems. Scams targeting individual investors have become particularly pervasive, with social media and messaging platforms being common tools for deception.

Regulation Still Uneven Across the Globe

Despite repeated FATF advisories and global dialogue, a large majority of countries continue to lag behind in implementing effective crypto regulation. As of April 2025, only 40 out of 138 jurisdictions assessed were found to be “largely compliant” with FATF standards—an improvement from 32 the previous year, but still far from adequate.

Many countries are yet to enforce mandatory registration or licensing for VASPs. Others struggle to monitor or identify offshore platforms that continue to operate outside national jurisdiction but serve domestic users.

In particular, FATF pointed out ongoing difficulties with tracing the real owners behind crypto operations, often due to the use of shell companies or complex blockchain privacy tools.

Need for Coordinated Global Action

The FATF emphasized that jurisdictions representing 98% of the global crypto market must commit to full implementation of its guidelines if meaningful progress is to be made. Partial or uneven compliance, especially from major economies or key financial hubs, risks undermining the integrity of the entire international financial system.

The organization called for faster deployment of licensing requirements, cross-border supervision, asset recovery protocols, and the “travel rule”—a standard that mandates VASPs to share originator and beneficiary information during transfers.

Without coordinated oversight, the FATF warned that bad actors will continue to exploit regulatory loopholes, shifting their operations to less restrictive jurisdictions while evading prosecution.

Nigeria’s Response to Global Crypto Threats

In Nigeria, where interest in digital assets continues to surge among tech-savvy youth and entrepreneurial communities, the government has made significant strides toward regulation. The Securities and Exchange Commission (SEC), through its Accelerated Regulatory Incubation Program (ARIP), has taken steps to provide regulatory clarity for the burgeoning sector.

Under ARIP, the SEC granted trial licenses to Quidax and Busha, two leading Nigerian crypto exchanges, in August 2024. This move marked a cautious but strategic step toward establishing a controlled and secure environment for virtual asset trading in the country.

Furthermore, the recently enacted Investments and Securities Act (ISA 2025) gives the SEC broad authority to oversee digital asset activities. This legislative backing positions Nigeria as one of the few African countries with a formal regulatory framework tailored specifically to crypto markets.

However, FATF’s findings suggest that Nigerian authorities, like their global counterparts, still face challenges in enforcement, cross-border tracking, and capacity building. The growth of peer-to-peer trading platforms, which often operate outside regulatory reach, remains a persistent blind spot.

What’s Next for Crypto Regulation?

Looking ahead, FATF is urging governments, regulators, and crypto businesses to adopt a proactive, collaborative approach. Key priorities include:

• Strengthening international asset recovery mechanisms

• Expanding KYC (Know Your Customer) and AML monitoring protocols

• Investing in blockchain analytics and compliance technologies

• Enforcing the travel rule for all cross-border crypto transactions

• Identifying and sanctioning non-compliant VASPs

As crypto usage continues to expand—both in emerging and developed markets—the need for consistent, enforceable rules becomes more pressing.

Final Thoughts

The FATF’s latest report paints a sobering picture of how quickly illicit activity in the crypto space has grown—and how slowly regulation has followed. With billions of dollars in thefts, scams, and laundering already recorded in 2024, the international community can no longer afford fragmented oversight.

While countries like Nigeria are making commendable progress through targeted policies and regulatory innovation, more urgent action is required on a global scale. Only through unified standards, real-time data sharing, and robust enforcement can the promise of digital assets be fulfilled without compromising the security of the global financial system.