The financial landscape is undergoing a significant transformation with the rise of stablecoins, offering enhanced speed and programmability in payments but also presenting intricate regulatory and compliance challenges. As banks and financial institutions increasingly interact with stablecoin issuers, the management of associated risks—regulatory, cybersecurity, operational, liquidity, and counterparty—has become critical.
Recent developments from the Wolfsberg Group, along with insights from TRM Labs regarding the GENIUS Act and the appointment of Luke Dufour as Compliance Advisor in EMEA, mark important strides towards mitigating financial crime risks in this evolving ecosystem. The Wolfsberg Group, comprising 12 global banks devoted to financial crime risk management, published guidance on September 8, 2025, detailing principles for banks engaging with fiat-backed stablecoin issuers.
This guidance highlights the significance of utilizing on-chain insights to evaluate and monitor the risk profiles of issuers. Banks must gain a comprehensive understanding of how issuers manage their on-chain risks, focusing on the transparency and centralization of the blockchains utilized for token launches. The Wolfsberg Group stresses the necessity for banking institutions to conduct extensive due diligence during the onboarding process, assessing the risk appetites of issuers—whether they prefer regulated, low-risk partners or choose to work with unregulated entities that may operate in higher-risk jurisdictions. Continuous monitoring is also emphasized, with banks encouraged to use blockchain analytics to confirm that issuers’ on-chain activities are consistent with the declared risk profiles.
For example, carefully analyzing transactions involving high-risk wallets through multiple intermediate steps can assist banks in managing their indirect exposure. Tools like Elliptic’s Issuer Due Diligence solution are aligned with this guidance, aiding banks in the seamless integration of blockchain analytics into existing compliance frameworks.
In tandem with the Wolfsberg guidelines, TRM Labs recently conducted a session focused on the US Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which is now law. The Act lays down explicit regulations for stablecoin issuance, reserve requirements, and anti-money laundering (AML) obligations, reflecting heightened concerns about risks linked to illicit finance post-distribution. The webinar, featuring industry professionals such as Angela Ang, Aaron Chua, and Rodrigo Peiteado, underscored the importance of effective onboarding and bespoke transaction monitoring to strike a balance between risk management and customer experience.
By 2024, stablecoin transfer volumes soared to USD 35 trillion, exceeding those of major players like Visa and Mastercard, with an average transfer size of USD 675,000. This surge highlights the growing institutional adoption of stablecoins and the corresponding increase in compliance responsibilities for financial institutions. TRM’s blockchain intelligence tools, such as the Detect module, facilitate real-time monitoring of wallet activities, identifying unexpected fund movements to avert security incidents.
The T3 Financial Crime Unit, a collaboration between TRON and Tether, has further contributed to asset recovery efforts by freezing over USD 200 million in illicit assets since its inception. The appointment of Luke Dufour as Compliance Advisor in EMEA within TRM Labs strengthens the firm’s regional expertise with his extensive background in regulatory affairs and financial crime prevention. Dufour will support crypto businesses and financial institutions in navigating the intricate regulatory landscape of Europe, including the EU’s Markets in Crypto-Assets (MiCA) framework.
As jurisdictional fragmentation complicates compliance, it is imperative for firms to align with local regulations while ensuring global interoperability. These developments highlight the need for proactive risk management strategies. Banks must implement robust Know Your Customer (KYC) and customer due diligence processes, engage in ongoing transaction monitoring, and screen against sanctions lists to adhere to the Financial Action Task Force’s (FATF) Travel Rule.
Establishing clear policies that favor regulated, fully reserved stablecoins and collaborating with issuers through initiatives like the T3 unit are vital for asset recovery and regulatory compliance. As stablecoin adoption continues to grow, tools such as TRM’s Wallet Screening and Beacon Network—developed in partnership with firms like Coinbase and Binance—offer real-time intelligence to block illicit funds, thereby reinforcing the integrity of the ecosystem.
In a landscape increasingly shaped by the GENIUS Act, financial institutions must embrace a risk-based approach, harnessing blockchain analytics and fostering public-private partnerships to navigate the complexities associated with stablecoins. By aligning with the principles set forth by the Wolfsberg Group and leveraging TRM’s expertise, banks can enhance their capacity to mitigate financial crime risks while simultaneously promoting advancements in digital finance.
