Stablecoin opposers point to transfers of illicit funds.

Proponents argue that the transparent nature of blockchains can be used to detect such crimes. 

There is a lack of awareness of how a deep integration of stablecoins in global finance can drive the use of blockchain's properties of immutability and transparency to fight financial crimes, even in traditional finance.

The stablecoin story

The stablecoin industry is going from strength to strength, aided by increased regulatory clarity and meaningful use cases. The ability to facilitate swifter, more cost-effective transactions than traditional banking rails has accelerated their adoption worldwide. The total value in circulation is estimated to be north of $200 billion.

We now have a host of tech firms, retail giants and traditional financial institutions lining up to issue their own stablecoins. The payment economy might be on a metaphorical spiral staircase that runs back to pre-Civil War times. Back then, the US had hundreds of local banks, each issuing their own private currency to be used as legal tender. Despite being a part of everyday payments, those currencies were not accepted too far away from the issuing bank. In hindsight, this probably kept an unintended check on any attempt to obfuscate the money trail.

Tracking illicit finance

In contrast, with thriving crosschain interoperability, it can be safely assumed that users will not have to jump through hoops to convert one stablecoin to another or any other digital asset or off-ramp them to fiat. This vision of the near future, marked by unabated and instantaneous capital flows across jurisdictions, naturally translates to stringent regulations to address illicit finance. 

Regulatory guardrails for stablecoins mandate adherence to the highest standards of Anti-Money Laundering (AML) compliance. Surprisingly, the prowess of stablecoins themselves, to beef up law enforcement's fight against financial crime, is not yet a part of the crypto zeitgeist. 

Stablecoins flowing across the globe on immutable, transparent, public blockchains add teeth to the global fight against illicit finance by providing traceability in international finance with a much-needed leg up.