Financial crime watchdog, the Financial Action Task Force (FATF), has raised an alarm over the rise of illicit finance through cryptocurrencies, warning that this could have dire consequences for the global financial market.
As a result, the body calls on countries to accelerate the implementation of anti-money laundering (AML) and counter-terrorist financing (CFT) measures in the rapidly evolving virtual asset (VA) sector.
In its sixth targeted update on global AML/CFT compliance related to virtual assets and virtual asset service providers (VASPs), released Thursday, the FATF reported progress in regulatory development, but highlighted major gaps in supervision, enforcement, and cross-border coordination.
“With virtual assets being inherently borderless, regulatory failures in one jurisdiction can have global consequences,” the organization warns.
The FATF highlighted stablecoins—a class of digital assets typically pegged to fiat currencies—as an emerging high-risk channel for money laundering, terrorism financing, and cybercrime.
According to the organization, most illicit on-chain activity in 2024 involved stablecoins.
The FATF said that while progress has been made since 2024 in regulating virtual assets, many jurisdictions still have work to do to combat risks.
“Jurisdictions have also reported challenges with mitigating the risk of offshore VASPs,” it added.
The FATF emphasized that jurisdictions representing 98% of the global virtual asset market must fully implement its standards to meaningfully reduce global risks.
In Nigeria, where the majority of its digital native youths continue to participate actively in the digital asset market, the Securities and Exchange Commission (SEC) is making efforts to regulate the crypto space through its Accelerated Regulatory Incubation Program (ARIP).
Under the program, the Commission licensed two crypto exchanges, Quidax and Busha, last August to test the waters of its crypto regulation.
The Investments and Securities Act (ISA 2025), recently signed by President Tinubu, also empowers the market watchdog to regulate the trade and use of digital assets in the country.