FATF Recommends Stablecoin Issuers Embed Freeze Function and Blacklist Mechanisms in Smart Contracts

According to Odaily, the Financial Action Task Force (FATF), an anti-money laundering watchdog, stated in its latest report that peer-to-peer (P2P) stablecoin transfers have become a significant vulnerability for money laundering, terrorist financing, and sanctions evasion in the crypto space. Since transactions occur directly between users' self-custodied wallets without the involvement of regulated intermediaries, related activities are harder to monitor and trace. FATF recommends that stablecoin issuers embed technical control measures in smart contracts, including freezing, blocking, or reclaiming tokens from suspicious addresses, and restrict specific wallet addresses from participating in transactions through allow-list and deny-list mechanisms to help law enforcement agencies block illicit fund flows. (Decrypt)