27th June

You can read last week's “This week in crypto” here.

The Financial Action Task Force (FATF) this week issued a stark warning on the rapidly growing intersection between crypto assets and global financial crime. Only 40 out of 138 jurisdictions assessed were deemed largely compliant with FATF’s standards as of April 2025. This reflects a worrying stagnation in implementation since 2024, and highlights how loopholes in any country can undermine global oversight.

FATF noted that illicit wallet addresses received approximately $51 billion in 2024, with stablecoins being increasingly used to disguise flows tied to North Korea, terrorist groups and drug cartels. The group called for urgent harmonisation of regulations and enhanced controls on stablecoin issuance and exchange platforms.

A further concern is the $1.5 billion hack on the ByBit exchange in February 2025, reportedly executed by North Korean actors — the largest crypto heist to date. This highlights how unregulated or loosely monitored crypto infrastructure can pose systemic risks.

FATF insists that laggard jurisdictions must be compelled to implement Recommendation 15 effectively, introducing risk-based licensing, KYC, and transaction monitoring. Without this global coordination, bad actors may continue exploiting digital assets.

A new ruble‑pegged stablecoin known as A7A5 has quietly processed over €9.3 billion since its launch in February 2025—potentially serving as a sanctions-busting tool for Russia. It is reportedly backed 1:1 by deposits in Promsvyazbank, a sanctioned Russian state-owned bank, and operates via Kyrgyzstan-based exchanges such as Grinex.

Although not officially endorsed by Moscow, sources close to the Kremlin have expressed favourable views, and Chainalysis estimates over 60 percent of A7A5’s volume may be linked to money laundering. This suggests A7A5 is filling a dangerous vacuum in illicit cross-border finance.

The token is promoted by or connected to Ilan Şor, a sanctioned Moldovan‑Israeli oligarch. Its usage across fringe exchanges suggests deliberate circumvention of Western sanctions. Critics warn that its rise represents a worrying fusion of crypto innovation with state-linked geopolitical evasion.

This development fuels global concerns voiced by FATF and others, as it illustrates how private digital assets can be weaponised.

The European Central Bank’s president, Christine Lagarde, has urged the European Union to expedite legislation for a digital euro, warning that large-scale private stablecoins could threaten monetary sovereignty and disrupt banking systems. She highlighted that stablecoins with significant market share could encourage deposit migration away from traditional banks, possibly triggering bank runs during periods of stress.

Lagarde emphasised that a public digital euro would serve as a reliable, state-backed alternative, strengthening financial stability and complementing the private payment infrastructure. She also called for harmonised oversight across member states to ensure consistent regulation, citing the ongoing introduction of the EU’s MiCA framework and the need for clarity on interoperability between EU-approved tokens and those issued outside the bloc.

Her appeal comes as stakeholders debate how to balance innovation with stability. Supporters believe a digital euro would enhance competition and inclusivity, while critics caution against potential threats to bank utility models and monetary policy tools. As legislation advances, EU lawmakers will need to align digital euro objectives with broader financial stability goals.

Lagarde’s message underscores the urgency, pointing to digital fragmentation risks and the growing influence of global tech and private financial entities. The EU’s response could define Europe’s role in the evolution of digital money amid shifting global monetary dynamics.

On 24 June, the Bank for International Settlements (BIS) delivered its strongest warning yet on stablecoins, likening them to 19th-century private banknotes and arguing they lack essential monetary properties such as elasticity, integrity, and uniform value.

The BIS noted that dominant US dollar‑pegged stablecoins now account for approximately 99% of a $260 billion market, raising concerns about their vulnerability to depegging, insufficient reserves, and potential for rapid asset sell-offs, citing the collapse of TerraUSD in 2022 as a cautionary precedent.

The BIS proposed a tokenised unified ledger model to mitigate these risks—integrating central bank reserves, commercial bank deposits, and government debt. It highlighted ongoing collaborative initiatives such as Project Agorá and Project Pine, demonstrating the feasibility of programmable settlement using central bank money on blockchain‑like platforms.

The report concluded that while stablecoins play a role in digital finance, they should not replace sovereign currencies. The BIS advocated for a future where tokenised central bank money forms the backbone of a more resilient and transparent financial system.

This week in crypto, the Financial Action Task Force sounded the alarm on crypto-enabled financial crime, urging stronger global regulation after revealing that only 40 out of 138 jurisdictions fully meet its standards and highlighting a record $51 billion flowing into illicit wallets, including a $1.5 billion North Korean heist.

Meanwhile, the new Russian-linked A7A5 stablecoin has quietly moved over €9.3 billion since February, raising serious concerns about sanctions evasion via blockchain.

In Europe, ECB President Christine Lagarde pushed for accelerated legislation on a digital euro, warning that powerful private stablecoins could destabilise traditional banking systems and calling for pan-EU regulatory harmonisation.

Finally, the BIS sharply criticised existing stablecoin models—likening them to outdated private banknotes—and proposed a unified tokenised ledger combining central bank money, commercial deposits, and government debt as the future foundation for a secure digital financial system.

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