Stablecoins are moving into production at major banks faster than compliance programs are adapting, and the gap between the two is where the risk lives. Capgemini’s David Soiles and Manish Chopra examine what banks entering the market are discovering about the limits of their existing controls.
The old saying “buy the ticket, take the ride” is fitting to describe the wild, unpredictable nature of speculative cryptocurrencies. Over the past 15 years, bitcoin has evolved from a speculative asset to both an institutional and retail adopted asset class, with several ETFs providing access to bitcoin through common brokerage accounts and company-sponsored 401(k)s. Over that same time, thousands of speculative digital assets have been created, spiked in value, then plummeted to zero — and this turbulence has materially impacted investors.
Now we have the rise of stablecoins, which function as digital monetary instruments rather than speculative investment assets. Many large banks with trusted brands, embedded customer bases and well‑established controls see a strategic opportunity to issue their own stablecoins. By doing so, they aim to reduce payment friction, enable cheaper and faster cross‑border transfers, support intra‑company affiliate payments and real‑time trade settlements and ultimately reclaim market share from FinTechs.
While the acceptance of stablecoins has spiked recently, it’s not business as usual for compliance teams. Stablecoins are moving into production faster than programs can adapt. Banks would be wise to take caution when navigating this new landscape.
Demonstrating rigorous AML controls
The global stablecoin market could top $750 billion in just a few years, modernizing payments and increasing speed, cost-efficiency and transparency. That prediction is supported by burgeoning global legislation and regulations lending legitimacy to what was once a niche digital token.
There are many types of stablecoins today, and the payment-instrument types backed by large financial institutions fall under rigorous regulatory scrutiny. Issuers must continuously demonstrate that anti-money laundering (AML) and counter-terrorism financing (CTF) controls are in place. New products, particularly digital assets, are probed by malignant actors for weaknesses, particularly when products are implemented quickly. The pace of stablecoin adoption and implementation has yielded an uptick in on-chain crimes.
According to an analysis, 63% of the volume of illicit crypto transactions in 2024 was attributed to stablecoins, linked to money laundering, sanctions evasion and other crimes, although it should be noted that volume concentration reflects usage patterns, not necessarily higher inherent risk. Moreover, the report found that criminal transactions associated with sanctioned entities have shifted from other crypto assets, moving primarily to stablecoins from bad actors looking to capitalize on the US dollar’s stability.
Blockchain technology transcends banking hours and global borders, effectively requiring banks to adopt real-time surveillance. If they’re not already in the crypto market, this will be uncharted territory. Since stablecoin transactions settle significantly faster than traditional fiat rails, banks can no longer fully rely on batch processes, cutoff times, overnight reviews and other traditional compliance safeguards. Now, suspicious activity, liquidity stress, wallet behavior and redemption flows must be monitored and acted on 24/7/365.
Before banks issue their own stablecoins, they also need to ensure compliance requirements, such as cash and high-quality liquid assets (HQLA), are embedded into their technology and business operations from the outset, rather than being add-ons to existing AML/CTF programs. At the same time, they need to consider their own tolerance for risk as an organization.
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A key element for stablecoin compliance involves rethinking Know Your Customer/Know Your Client (KYC) processes. We see this in the US GENIUS Act and the EU’s Markets in Crypto‑Assets Regulation (MiCA), which impose strict KYC obligations on permitted payment stablecoin issuers (PPSIs) and crypto‑asset service providers (CASPs), respectively, requiring them to identify customers using official identification and proof of address.
Although KYC is the cornerstone of compliance programs, current methods can’t keep up with sophisticated money-laundering activities. They create vulnerabilities by relying on reactive, periodic reviews where customer information can become outdated. Red flags might be missed with infrequent cycles, compounded by slow, semi-automated processes. Another downside is that legacy compliance infrastructure simply can’t cut it in a stablecoin environment, where speed is essential and near real-time alerting scenarios are critical. Without a designated role responsible for real-time triage, institutions are left with a critical blind spot.
In contrast, the emergence of perpetual KYC creates proactive and highly responsive AML and CTF frameworks, transforming customer due diligence (CDD). Continuously updated customer intelligence combats the dynamic nature of customer risk that criminals aim to exploit. But effective pKYC requires a foundation of clean, quality data, consolidated across internal and external systems, so alerts can be raised whenever there’s a significant change or milestone in a customer’s life cycle that can increase its risk level and thus increase the bank’s overall risk exposure.
Firms also need to adapt to evolving legislation and regulatory priorities. In December 2025, the FDIC signaled it would “issue a proposed rule to establish the statutorily mandated capital, liquidity, and risk management requirements” for FDIC-supervised institutions. While this directive has yet to take shape, it points to another regulatory requirement banks need to integrate into their compliance roadmaps.
Orchestrating an end-to-end approach
Stablecoins are not simply a new form of digital cash. They offer a significant opportunity for banks to modernize payments and create new revenue streams, as long as they don’t unwittingly run afoul of regulators.
The smart strategy is to adopt an end-to-end approach, creating a triple-defense system of monitoring the blockchain, transactions and the ecosystem. Ecosystem monitoring, a relatively new AML concept, reviews the stablecoin continuum to detect, track and analyze wallet behavior, also identifying patterns and potentially detecting and blocking criminal activity in real-time. This is an essential tool for mitigating financial crime risk.
Banks also need to evaluate the efficacy of their modernized AML programs, establishing clear metrics, perhaps in concert with a pilot program, to identify issues and optimize solutions.
Bank‑issued stablecoins expose institutions to a risk landscape fundamentally different from traditional payment systems, where programmability, wallet-to-wallet transfers, and on/off‑chain interoperability can significantly amplify the impact of control failures. Financial institutions worldwide are working to develop the best stablecoin. Those that incorporate purpose-built compliance into their program will experience regulatory and commercial success, while those that don’t will create undue risk.
David Soiles
Manish Chopra
