Economist Gita Gopinath said on Tuesday that cryptocurrency legislation, including the GENIUS Act, will have limited success reducing illicit finance due to the large number of anonymous stablecoin holdings.
Stablecoins In Self-Custody: A Dark Spot?
Gopinath, at a lecture on the occasion of the Annual General Meeting of the Bank for International Settlements, pointed out that stablecoins are primarily held in their most anonymous form, a stark contrast to the preference for less anonymity in traditional money transactions.
While only about 7% of traditional money is held as cash, the most anonymous form, in the stablecoin ecosystem, Gopinath said, based on her research with co-authors. In contrast, 70%-75% of USDC (CRYPTO: USDC) & USDT (CRYPTO: USDT) are held in self-custody wallets, the most anonymous form.
The research found that the fewest stablecoins are held on U.S.-based centralised exchanges, including Coinbase Global Inc. (NASDAQ:COIN), considered “least anonymous” and “analogous to bank deposits.”
Holdings in non-U.S. exchanges, such as Binance (CRYPTO: BNB), were placed between self-custody and U.S. exchanges on the anonymity spectrum.
Loopholes In US Stablecoin Act?
Gopinath, former Chief Economist at the IMF, stated that the GENIUS Act, which regulates stablecoin issuers and centralized exchanges, does not cover self-custody wallets, peer-to-peer transfers, and offshore issuers and exchanges.
She added that while the European framework, i.e, Markets in Crypto-Assets, is more restrictive, it still excludes a large share of transactions.
“Consequently, GENIUS & MICA regulatory frameworks will likely have only a modest effect in preventing illicit activity,” Gopinath said.
Notably, New York’s leading prosecutors raised concerns earlier this year about the new stablecoin legislation, citing weaker safeguards for fraud victims
Stablecoin Role In Facilitating Illicit Volume
Gopinath pointed to the Chainalysis cryptocurrency crime report, showing that stablecoins accounted for 84% of the illicit cryptocurrency transaction volume in 2025.
“Stablecoins are a genuine innovation, but they are held and used in their most anonymous form. The task for policymakers is to manage the resulting trade-off,” the Harvard Professor said during the lecture.
A report by CertiK, a Web3 cybersecurity firm, highlighted the emergence of several major exploit trends in stablecoin infrastructure over the past 18–24 months.
Photo Courtesy: ddRender on Shutterstock.com
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