Stablecoin Compliance with AI: Expert Panel
Over the last few years, stablecoins have evolved from speculative crypto assets into legitimate payment instruments, with $250 billion in market capitalization and $27.6 trillion in transfer volume in 2024—surpassing the combined volume of Mastercard and Visa. Unlike volatile cryptocurrencies like Bitcoin, stablecoins are pegged to fiat currencies, making them attractive for payments and remittances. This explosive growth, coupled with the recent GENIUS Act bringing stablecoins under BSA requirements, has created new AML challenges for compliance teams.
In our recent expert panel on stablecoin compliance, Castellum.AI’s Head of Product, Morgan Loewith sat down with Kristen Hecht (CCO, 1Money), Brandi Reynolds (CCO, World Liberty Financial) and Dr. Shlomit Wagman (Chief Regulation Officer, Rapyd; former regulator and FATF leader) to discuss emerging financial crime typologies, new regulatory developments and how AI is becoming essential infrastructure for stablecoin compliance.
Clarity Emerges: What the GENIUS Act Means for Compliance
The regulatory landscape shifted dramatically in July 2025 when the GENIUS Act brought stablecoins explicitly under BSA requirements. Treasury recently opened a comment period on implementation, seeking input on everything from monitoring requirements to freeze and seizure order compliance.
The GENIUS Act signals that stablecoins are being treated as systemically important financial infrastructure, with expectations approaching those of depository institutions.
The panel noted that after years of regulatory uncertainty, the industry finally has a framework to work within. One significant development: Federal Reserve Banks may coordinate with state regulators on examinations—a level of federal-state oversight previously uncommon for money services businesses (MSBs).
While implementation details from Treasury and FinCEN are still forthcoming, the panel expressed cautious optimism. Companies with mixed business models—handling stablecoins alongside money transmission or other crypto activities—will still navigate multiple regulators with potentially different expectations.
Stablecoins and AML: What Compliance Teams Need to Do
Old Crimes, New Infrastructure: What's Actually Changing
The fundamental challenge compliance teams face is that stablecoins don't fit neatly into traditional finance or crypto frameworks. Traditional banking lets you see one or two steps in a transaction chain. Stablecoins operate on transparent blockchains, but managing massive data volumes across clusters, counterparties and protocols requires additional compliance controls and the means to monitor this data. Compliance teams are no longer monitoring individual customers—they're monitoring entire networks.
“We have to focus on customer due diligence, but we also have to focus on the networks behind where the stablecoins are coming and going, which means that we need to be monitoring clusters, counterparties and protocols.” - Kristen Hecht, CCO, 1Money
However, the financial crime typologies remain largely familiar. Cross-border transfers through high-risk virtual asset service providers (VASPs) bypass sanctions filters, while trade-based laundering schemes use falsified documentation just as they always have. Panelists also highlighted a growing trend of chain hopping across blockchains that obscures transaction trails, DeFi exploits that drain liquidity from platforms and pig butchering scams that continue to proliferate.
The technology has changed, but criminal objectives haven't: they're still working to obscure their identity, place funds, layer transactions and integrate proceeds back into the legitimate economy.
What's actually changed is the scale, speed and visibility of the data—turning monitoring into a fundamentally different challenge.
Blind Spots That Traditional Tools Miss
Despite blockchain transparency, the panel identified some critical vulnerabilities where criminals are exploiting gaps between different monitoring systems:
Jurisdictional layering: Bad actors open wallets in poorly supervised jurisdictions, move through medium-scrutiny environments, then land at well-regulated VASPs. Traditional tools focused on the most recent steps in a transaction chain miss the source.
The fiat-crypto bridge: When transactions cross from stablecoins to traditional finance, information breaks down. FATF’s Crypto Travel Rule applies but doesn't seamlessly transfer to fiat systems, especially fintech platforms.
Single-chain blind spots: The panel flagged that blockchain analytics are essential, but single-chain visibility creates blind spots. In practice: criminals may move stablecoins from Ethereum to Polygon to Tron to exploit blockchain analytics blind spots.
Transaction-level versus network-level detection: Traditional red flag systems focus on individual transactions, but sophisticated actors use so many wallets that each transaction looks clean. Wagman's team detected Iranian networks by identifying systematic patterns across clusters, revealing illicit activity that no single VASP could see on its own.
Deploying AI as Essential Infrastructure
Agentic AI has shifted from optional tool to essential infrastructure for stablecoin compliance. The panel made clear that this isn't just about efficiency gains—it's about keeping pace with criminals who are already using AI to evade detection.
AI-generated phishing, deepfakes and hyper-personalized social engineering are already proliferating, and AI-native detection systems are becoming necessary for defense.
The discussion revealed two critical considerations for AI integration:
1. Why AI has become essential
AI delivers significant automation gains—compliance teams are seeing up to 90% improvements in high-risk onboarding with fewer errors than manual processes. Beyond efficiency, AI excels at pattern recognition, identifying anomalies and clusters that traditional rule-based systems miss.
2. How teams should approach deployment
The panel recommended starting with immediate, lower-risk applications like using agentic AI to clear obvious false positives from legacy screening and transaction monitoring systems, freeing analysts for complex investigations. Equally important is understanding how your AI tools work and being able to share this with examiners. Explainability is a non-negotiable regulatory requirement.
Where the Industry Is Headed
The panel's discussion revealed clear trends in how leading institutions are approaching stablecoin compliance:
Moving beyond transaction-level monitoring. Forward-thinking compliance teams are investing in cross-chain blockchain analytics and agentic AI systems that can identify sophisticated networks operating across multiple VASPs.
Bridging fiat and crypto visibility gaps. As stablecoins increasingly serve as payment rails between traditional finance and digital assets, institutions are documenting where information breaks down at conversion points and building monitoring strategies accordingly.
Starting AI deployment strategically. Early adopters are beginning with controlled pilots—particularly for false positive elimination—while establishing governance frameworks that define escalation triggers and audit trails.
Preparing for heightened scrutiny post-GENIUS Act. With coordinated state and federal examinations expected under the GENIUS Act framework, compliance programs are documenting their controls to demonstrate how network-level monitoring and AI tools work together.
Up-skilling compliance teams. AI won't replace compliance teams, but it will change required skills to move from alert review to AI system oversight, QA and tuning.
Regulation is Catching up to the Market with GENIUS
The webinar made clear that stablecoin compliance sits at the intersection of three simultaneous shifts:
Regulatory frameworks finally catching up to market reality through the GENIUS Act;
Criminal networks leveraging AI and exploiting cross-chain and jurisdiction gaps;
AI evolving from to become an essential security and compliance tool.