FATF Warns of 73% Jurisdictions Enacting Travel Rule Laws, 60% Lacking Enforcement

The Financial Action Task Force (FATF) has issued a report highlighting the increasing misuse of stablecoins and the lagging global regulations for virtual assets. The report, released this week, indicates that while global efforts to regulate virtual assets and service providers have improved, they remain incomplete. The illicit use of stablecoins has accelerated sharply in 2025, posing significant challenges to financial regulators worldwide.

The FATF's sixth targeted update on the implementation of its standards revealed that 73% of the jurisdictions surveyed have enacted laws enforcing the so-called Travel Rule for crypto transfers. However, enforcement of these laws remains limited, with nearly 60% of the 85 countries that have Travel Rule laws yet to issue compliance findings or directives. This lack of enforcement has allowed illicit activities to flourish, particularly in the stablecoin sector.

The report also highlighted a significant virtual asset theft this year, where North Korean actors stole $1.46 billion from the crypto exchange Bybit. The hackers employed social engineering and complex laundering networks involving mixers, over-the-counter (OTC) traders, and more than 125,000 Ethereum wallets. Only 3.8% of the stolen funds were recovered, underscoring the difficulties in tracing and repatriating crypto-linked proceeds of crime.

Stablecoins have become the dominant vehicle for illicit on-chain activity due to their low cost, fast settlement, and broad liquidity. The report cited private sector estimates showing over $30 trillion in stablecoin volume during the past year. This growth has been accompanied by an increase in ‘pig butchering’ scams and professional scam networks employing AI-generated chatbots and deepfakes to defraud victims.

Despite these risks, the report found that only one jurisdiction is fully compliant with FATF Recommendation 15 on virtual asset oversight. Approximately 29% of countries were rated ‘largely compliant,’ while about half remain only partially compliant and 21% are not compliant at all. This uneven compliance has created regulatory gaps that illicit actors can exploit.

The FATF urged jurisdictions to accelerate the licensing and registration of virtual asset service providers, strengthen enforcement against unregistered entities, and implement measures to monitor decentralized finance (DeFi) arrangements. The report noted that around half of the surveyed regulators require DeFi projects with identifiable control parties to register as virtual asset service providers (VASPs), but enforcement remains rare.

Looking ahead, the FATF plans to release targeted reports on stablecoins, offshore VASPs, and DeFi over the next year. The regulatory body warned that as stablecoins approach mass adoption, uneven global regulation will heighten illicit finance risks and hamper coordinated responses. The next comprehensive update on Recommendation 15 implementation is due in 2026.