Stablecoins, the virtual currencies which seek price stability, could be the next target for money laundering and terrorist financing, a report found.
The survey, requested by the G-20, a group of finance ministers and central bank governors from the world’s largest economies, identified finance vulnerabilities that must be fixed before digital currencies are used globally, The Wall Street Journal reported.
To mitigate risks, the Financial Action Task Force (FATF), the Paris-based intergovernmental organization whose mission is to combat money laundering and terrorism financing, recommended that all jurisdictions implement its standards for virtual assets, the Journal reported.
The FATF said it will review the implementation and impact of its standards by next summer and provide further guidance on stablecoins and virtual assets.
It noted 25 countries or regions among its members — and virtual asset service providers — have made progress in implementing its standards.
Typically, the value of stablecoins is linked to a variety of benchmarks, such as the value of a fiat currency, government-issued currency that isn’t backed by a commodity such as gold, or a basket of assets that could include investment securities and commodities, the newspaper reported.
Today, there are a number of stablecoins including Tether, USD Coin and Paxos, as well as Facebook’s Libra and Gram that have been proposed.
While stablecoins are limited, their promise of price stability could make them likely to become more popular than some existing virtual assets — particularly if they are sponsored by large technology, telecom or financial companies, according to the report cited by the Wall Street Journal.
Last fall, FATF raised concerns about how stablecoins could be used for illicit purposes.
The group said it was worried that the potential widespread adoption of stablecoins would be outside regulatory agencies and make it easier for criminals to break the law with the currency.
“If stablecoins were to become widespread, it could potentially lead to new risks regarding money laundering and terrorist financing,” FATF President Xiangmin Liu said at the time. “It is our job to ensure the new risks in connection with stablecoins will be adequately addressed.”
From January through May cryptocurrency thefts, hacks and frauds totaled $1.4 billion, and could exceed the 2019 loss of $4.5 billion by year’s end, PYMNTS reported last month.
CipherTrace’s “Spring 2020 Cryptocurrency Anti-Money Laundering and Crime Report” revealed the thefts have escalated in the wake of the COVID-19 pandemic and ensuing global economic crisis.