meta_id 2980828

On March 18, 2026, the Cyprus Securities and Exchange Commission (CySEC) issued Circular No. C762 drawing attention to a Financial Action Task Force (FATF) report on stablecoins and unhosted wallets published on March 3, 2026. The FATF report identifies illicit finance risks associated with stablecoins, particularly through peer-to-peer transactions via unhosted wallets. The report highlights how stablecoins' price stability, liquidity and interoperability, while supporting legitimate use, render them attractive for criminal misuse including money laundering, terrorist financing, and cybercriminal activities. The report notes specific concerns regarding state-linked cybercriminal groups, including those linked to the Democratic People's Republic of Korea, which have adopted stablecoins for laundering ransomware and phishing proceeds. Iranian actors have also used stablecoins in proliferation financing contexts. Key vulnerabilities identified include peer-to-peer transactions occurring directly between individuals or entities without regulated intermediary involvement, and difficulties stablecoin issuers face in controlling cross-chain activities that may fall outside counter-illicit finance controls. The report also presents good practices and case studies demonstrating how blockchain analytical tools and other risk mitigation measures have been used to detect and disrupt illicit stablecoin activity. CySEC expects regulated entities—including crypto asset service providers, collective investment firms, UCITS management companies, alternative investment fund managers, and small alternative investment fund managers—to adequately identify, assess and mitigate risks associated with stablecoins and unhosted wallets in accordance with the FATF's 2021 Updated Guidance for a Risk-Based Approach to Virtual Asset Service Providers. Regulated entities must enhance their understanding of these risks and strengthen their risk-based approach under the Prevention and Suppression of Money Laundering Activities Law. REFERENCES: Cyprus Securities and Exchange Commission Circular No. C762 (March 18, 2026)