Global watchdog urges crackdown on crypto crime as risks grow

The world’s leading financial crime watchdog has sounded the alarm over gaps in cryptocurrency regulation, urging governments to take far stronger action against illicit finance in the booming sector.

The Financial Action Task Force (FATF), based in Paris, warned on Thursday that shortcomings in policing virtual assets risk creating global financial vulnerabilities, with criminals exploiting loopholes across borders. “Virtual assets are inherently borderless, and regulatory failures in one jurisdiction can have global consequences,” the FATF said in a statement, as quoted by Reuters. The call-to-action underscores mounting concern among global regulators that rapid growth in crypto markets is outpacing efforts to keep them in check.

Patchy compliance despite progress

According to the FATF’s latest assessment, progress on tightening crypto rules remains uneven. As of April 2025, only 40 out of 138 jurisdictions assessed were considered “largely compliant” with its standards, up from 32 the previous year.

While that improvement reflects some momentum, it also highlights the vast number of countries lagging behind. FATF officials warn that these regulatory gaps create safe havens for criminals, making it harder to trace illicit financial flows that move seamlessly across national borders.

Surge in illicit crypto activity

The watchdog cited alarming figures pointing to the scale of the problem. Blockchain analytics firm Chainalysis estimates that illicit crypto wallet addresses may have received as much as $51 billion in 2024 alone. Countries, the FATF says, continue to face major difficulties in identifying the real people behind virtual asset transactions, a key challenge in disrupting networks of money launderers, sanctions evaders and terror financiers.

FATF also flagged particular concern over the rising role of stablecoins, cryptocurrencies pegged to fiat currencies like the US dollar which it said have become a preferred tool for various illicit actors. “Most illicit crypto activity now involves stablecoins,” the FATF warned, adding that the technology is being misused by groups including terrorist financiers, drug traffickers and state-backed cyber criminals.

Spotlight on North Korea

The report comes amid heightened scrutiny of North Korea’s role in global cybercrime. In February 2025, the FBI blamed North Korean hackers for the theft of around $1.5 billion worth of virtual assets from the crypto exchange ByBit, the largest known crypto heist in history.

Pyongyang has repeatedly denied involvement in such attacks, but security agencies in the US and allied countries say North Korea’s regime relies heavily on crypto thefts and ransomware operations to fund its weapons programmes.

Global authorities ramp up warnings

The FATF’s statement is the latest in a series of warnings from international regulators about crypto’s potential to undermine financial stability and security. In April 2025, the European Union’s securities watchdog cautioned that the rapidly expanding crypto sector could pose systemic risks, particularly as its links with traditional financial markets deepen. As governments scramble to finalise regulatory frameworks, FATF urged them to prioritise closing loopholes, increasing oversight, and improving coordination. Without such steps, it warned, the risk of crypto markets being weaponised by criminals and even hostile states will only grow.

The message is clear: despite technological innovation and growing mainstream adoption, the crypto industry remains in urgent need of stricter global policing to prevent it from becoming a haven for financial crime.

(With inputs from the agencies)