A dive into the world of stablecoins

Publication date 23-05-2025

Stablecoins have quickly become a crucial part of the financial crypto landscape. Transaction volumes now exceed those of traditional payment systems. As a result, they are attracting increasing attention from regulators and investigative services. This article highlights the specific money laundering risks of stablecoins, particularly USDT (from Tether) as the dominant player in the stablecoin market.

The emergence of stablecoins and USDT

Stablecoins are digital coins whose value is linked to a stable underlying value, such as a fiat currency, for example the US dollar. Fiat money or fiduciary money is a national currency that is not linked to the price of a commodity, such as gold or silver. The value of fiat money is largely based on the confidence that the population has in the body that issues the currency.

In 2024, over 15 trillion dollars worth of transactions were processed using stablecoins, which is more than the transactions of Mastercard and Visa combined and double the amount from the previous year. Within this landscape, USDT dominates with a market share of approximately 69%.

Tether, the company behind USDT, claims that every token issued is fully backed by reserves: ‘All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 USD₮ = 1 USD) and are backed 100% by Tether's reserves.’ According to Tether, these reserves consist of various assets, including cash and cash equivalents (85.05%), precious metals (3.78%), bitcoin (1.94%), secured loans (6.36%) and other investments (2.73%).

Technical features of the USDT relevant to money laundering risks

Multi-blockchain functionality

A crucial feature of USDT is its ability to operate on different blockchains. This stablecoin is built on multiple blockchains, such as Ethereum and Avalanche, but also the TRON network, for example.

This multi-blockchain functionality offers both legitimate advantages and opportunities for abuse. Users can choose which blockchain best suits their needs, with some chains known for their efficiency and low costs, such as Tron.

Cross-chain bridges

A relevant aspect of this is the possibility to move USDT from one blockchain to another via so-called ‘decentralized bridges’. These enable USDT owners to transfer the stablecoin from one network, for example Ethereum, to another network, such as the TRON network, via such a bridge.

Combination of speed, stability and accessibility

The properties that make stablecoins attractive to legitimate users also make them interesting to criminals. The advantages for legitimate users are clear. Transactions are fast, cheap and stable in value. But it is precisely these properties that also make stablecoins attractive to criminals. Stablecoins combine the speed and borderless nature of cryptocurrency with the price stability of fiat money, making them ideal for cross-border value transfers without the volatility risks associated with traditional cryptocurrencies such as Bitcoin.

TRON network as preferred platform

In recent investigations, USDT on the TRON network has come to the fore in a prominent way. This is no coincidence; the TRON network offers very low transaction fees and high processing speeds, making it attractive for large-scale transactions.

Challenges for anti-money laundering authorities

Complexity of multi-blockchain analysis

Tracking transactions that bridge multiple blockchains requires specific expertise and tools, making knowledge of networks such as Tron essential for anti-money laundering authorities. Anti-money laundering authorities must be familiar with various blockchain explorers and analysis tools in order to effectively track USDT transactions across multiple networks.

Scale and volume

With daily trading volumes exceeding $11.5 billion, monitoring USDT transactions is challenging. This high liquidity makes it easier to conceal illegal cash flows among legitimate transactions.

Investigation possibilities

Despite the challenges, USDT also offers opportunities for supervision and investigation that do not exist with decentralised cryptocurrencies such as Bitcoin.

Centralised distribution and control

Unlike bitcoin, stablecoins are usually issued centrally by a company or organisation. Take Tether, for example, which issued the stablecoin USDT.

This centralised structure provides leads for investigation services: for example, it is possible to ask that central party to hold or freeze transactions or stablecoins in a custodial wallet.

Blockchain

The following applies to all cryptocurrencies: the blockchain is an open ledger that makes transactions verifiable, even when using the aforementioned “bridges”.

Conclusion and recommendations

USDT and other stablecoins represent a new challenge and opportunity for combating money laundering. Their unique combination of stability, speed and flexibility across different blockchains makes them both valuable to legitimate users and potentially attractive to criminals.

For an effective fight against money laundering, it is essential that investigation services, financial institutions and regulators:

1. invest in blockchain analysis expertise, with a specific focus on multi-chain analysis.
2. collaborate with stablecoin issuers such as Tether to identify and freeze suspicious funds.
3. prepare for a future in which stablecoins are an integral part of the financial system.

An AMLC podcast about stablecoins was published on 6 May 2025 and can be listened to on the most popular podcast apps, such as Spotify and Apple podcasts. In that podcast, Bart van de Donk of Chainalysis concludes that: “..it is important that we, as gatekeepers and regulators, prepare ourselves well for a future in which stablecoins have a permanent place in the financial system.”