Banks Must Manage Stablecoin Risk or Miss Opportunity
The stablecoin market has grown to over $300 billion in value, making it an attractive option for banks and payment providers. However, this growth also brings a higher risk of financial crime, including money laundering and sanctions evasion.
Elliptic's research highlights the three channels through which stablecoin risk reaches a bank: as a counterparty, when a stablecoin issuer asks a bank to hold reserves or run settlement accounts; as a product, when a bank offers stablecoin services of its own and inherits their design risks; and indirectly, through customers and virtual asset service providers (VASPs) whose flows touch higher-risk stablecoins or jurisdictions.
The risk profile of a stablecoin is shaped by five key factors: transferability, ecosystem participants, regulatory status, freezability, and the use of blockchain analytics. Banks need to assess these risks and implement controls to manage them.
Elliptic's Issuer Due Diligence tool allows banks to verify an issuer's on-chain activity against its stated risk profile, while also monitoring their business model, governance, and controls. For indirect exposure to stablecoins, a bank must map which customers and VASPs send or receive stablecoins and identify any intersections with known money-laundering, sanctions-evasion, and fraud typologies.