Stablecoins, cryptocurrencies tied to a stable value such as the US dollar, were created with the promise of bringing Bitcoin’s cross-border liquidity into a form of digital money with much lower volatility. This combination has proven widely popular, with the total value of stablecoin transactions since 2022 even exceeding the value of Bitcoin itself.
However, it turns out that as stablecoins have become popular among legitimate users over the past couple of years, they have become even more popular among a different kind of user: those who exploit them for billions of dollars from evading international sanctions and scams.
As part of its annual crime report, cryptocurrency tracking firm Chainalysis today released new figures on the disproportionate use of stablecoins for both massive categories of illicit cryptocurrency transactions over the past year. By analyzing blockchains, Chainalysis determined that stablecoins were used in fully 70 percent of cryptocurrency fraud transactions in 2023, 83 percent of cryptocurrency payments to sanctioned countries such as Iran and Russia, and 84 percent of cryptocurrency payments to individuals. Specifically, sanctioned companies. These numbers far outweigh the growing overall use of stablecoins — including for legitimate purposes — which represents 59 percent of total cryptocurrency transaction volume in 2023.
In total, Chainalysis measured $40 billion in illicit stablecoin transactions in 2022 and 2023 combined. The largest category of such crimes relying on stablecoins was sanctions evasion. In fact, across all cryptocurrencies, sanctions evasion accounted for more than half of the $24.2 billion criminal transactions observed by Chainalogy in 2023, with stablecoins accounting for the vast majority of those transactions.
The appeal of stablecoins for both sanctioned people and countries is that they allow sanctions targets to circumvent any attempt to deprive them of a stable currency like the US dollar, says Andrew Firman, head of sanctions strategy at Chainalysis. “Whether it’s an individual who’s in Iran or a bad guy trying to launder money, either way, there’s a benefit to the stability of the U.S. dollar that people are looking to get,” Ferman says. “If you are in a jurisdiction where you cannot access the US dollar due to sanctions, stablecoins become an interesting play.”
As examples, Fairman points to Nobitex, the largest cryptocurrency exchange operating in the sanctioned Iranian country, as well as Garantex, a notorious exchange based in Russia that was specifically sanctioned for its widespread criminal use. Chainalysis found that stablecoin usage on Nobitex outpaces Bitcoin by 9:1, and on Garantex by 5:1. This is a stark difference from the roughly 1:1 ratio between stablecoins and bitcoin on a few major unauthorized exchanges that Chainasis examined for comparison.