Stablecoins are supposed to be the safe, stable layer of crypto, but a new report just exposed the cracks.

Bitrace, a blockchain compliance firm, says over $649 billion in stablecoin transactions from 2024 were linked to high-risk addresses.

That’s more than 5% of all stablecoin volume for the year — that’s a big share of the pie. It’s fraud, gambling, laundering, and the parts of crypto that the industry still struggles to contain.

Same Problem, Different Year

Illicit flows in stablecoins dipped slightly from 2023, but not by much.

5.14% of all stablecoin volume in 2024 was tied to suspicious addresses — down from 5.94% the year before, but still more than double 2022’s figures.

And significantly higher than the 1.6% reported in 2021.

So no, the problem isn’t going away — it’s just shifting shape.

Where It’s Coming From (And Going)

USDT on Tron is the star of this show, for all the wrong reasons.

Over 70% of high-risk flows were routed through Tron-based Tether. Ethereum-based USDT came in second, with USDC quickly catching up.

Tron’s low fees and huge supply make it the platform of choice for shady transactions.

Meanwhile, USDC, long positioned as the clean, compliant alternative, saw its share of high-risk flow more than double to 13.4%.

Even the good kids are getting pulled into the mess.

The Breakdown: Fraud, Gambling, and the Usual Suspects

Online gambling sites took in $217.8 billion in stablecoins, representing a nearly 18% year-over-year increase.

Fraud-related addresses had a record year, bringing in $52.5 billion — more than the total for the last three years combined.

Money laundering dropped to $86.3 billion, down from $118 billion in 2023 — but that’s still a massive number.

Why the decline? Probably more scrutiny, better exchange compliance, and possibly a few criminals adjusting their methods.

Web3 Isn’t Helping Here

Decentralized tools are making it more challenging to track these illicit flows, not easier.

Escrow services like Huione Guarantee handled $2.64 billion in shady transactions. And DEXs, lending protocols, and privacy layers continue to blur the lines between them.

The tech is getting better. So are the tactics.

Enforcement Is Catching Up — Slowly

There’s some pushback.

Tether and Circle froze over $1.3 billion in illicit funds this year — more than double what they seized across 2021–2023.

That’s progress. However, when the total problem is measured in the hundreds of billions, it barely makes a dent.

Meanwhile, Stablecoins Go Mainstream

While all this is happening, stablecoins are getting their moment in the spotlight.

Mastercard now supports USDC across 150 million merchants.

The STABLE Act just cleared the House Financial Services Committee, aiming to force tighter compliance and banking-style regulation for stablecoin issuers.

Regulators are stepping in because the market is growing too rapidly, and the risks are becoming too significant to ignore.

The Real Test Starts Now

The Bitrace report lays it out clearly: crypto is at a turning point.

Illicit finance is still rampant, but enforcement, adoption, and oversight are finally catching up.

Whether that’s enough is still unclear.

2025 could be the year stablecoins become fully legitimate — or the year bad actors adapt again and continue running the same playbook.