The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) has accelerated the path to mass adoption. This act has sparked new and increased interest in cryptocurrency as a payment method, whereas historically, there has been more focus on crypto as an investment asset, analogous to investing in and trading stocks. While stability in the value of cryptocurrency reduces risk volatility, it does not reduce the volatility in fraud risk.

These days, it feels nearly impossible to encounter someone unfamiliar with cryptocurrency. Whether it’s a reference in a movie or the presence of Bitcoin ATMs at gas stations, cryptocurrency awareness has indisputably reached a global, mainstream audience. Despite its name, cryptocurrency is much more commonly viewed as an investment opportunity than an actual currency used to purchase goods and services. This is for a number of reasons. The main reason has been its volatility in value.

Enter, stablecoins. Stablecoins aim to solve this challenge by offering cryptocurrency with a fixed value tied to fiat currency like the U.S. Dollar. This makes crypto as a payment method much more viable. But this viability, unfortunately, makes it a more attractive target for fraudsters.

Why fraudsters are attracted to stablecoins

Emerging technologies are popular bad actor targets

When new technologies catch on for wide-scale adoption, bad actors know that there is a higher risk of security vulnerabilities to exploit. Businesses introducing new solutions and options for customers are typically focused more on growth than risk management. Adding too much friction to a new channel can stifle adoption,  thus making stablecoin-enabled products attractive fraud targets.

Stable value means stable ROI

Fraudsters operate similarly to legitimate businesses in the sense that they expect a return on their investment. Fraudsters expect to make more money when they invest more time and effort. Stealing cryptocurrency valued at $10,000, which could lose half its value overnight, is less appealing than stealing $10,000 of stable value that will retain its value the same a month later.

The appeal of anonymity

Although stablecoins differ from traditional cryptocurrencies when it comes to value, they share the same value proposition in terms of anonymity. Stablecoins are like digital cash. An offline criminal stealing a person’s physical wallet would much rather have a wallet filled with $1,000 in cash than a credit card with a $1,000 credit line. This is because they can spend the cash without creating a paper trail, as with a credit or debit card. Fraudsters chase liquidity and anonymity, which makes stablecoins very attractive.

A bad actor using a stolen credit card at a retail location creates a record of their purchase on the victim’s statement, including a timestamp and physical location, which can be subpoenaed for video surveillance. Although the blockchain records cryptocurrency transactions, it does not offer this type of granular detail that can be traced back to the bad actor. In other words, stealing crypto reduces the fraudsters’ risk exposure.

Implications for stablecoin platforms

This has serious implications for fintech companies offering stablecoins to their customers. First, it makes digital wallet accounts higher risk. Fraudsters know that a wallet balance with stablecoin, or one that can be quickly converted to it, offers two key advantages: predictable value and high liquidity, which helps them launder the funds quickly and reduce the window of time investigators have to trace the assets.

Instead of fraudsters using stolen credit cards to purchase gift cards that can be deactivated by the business, stablecoins offer an opportunity to bypass the middleman and go directly to the desired source: the money. In a recent analysis across Riskified’s global network, stablecoin transactions were found to be twice as risky as transactions using other forms of payment.

In addition, a consumer with a balance of stablecoins has minimal protection from bad actors seeking to steal them. At this time, the GENIUS Act does not introduce consumer protections, which means that when they are a victim of a fraud event that involves the theft of stablecoins, they have no recourse to get the funds back. This lack of consumer protections not only creates a poor customer experience and erodes brand trust but also prevents a process for stablecoin platforms to address incidents, giving fraudsters a higher chance of escaping accountability.

Account takeovers

While transactional fraud is a critical risk, many of the most damaging losses originate upstream. Fraudsters increasingly focus on account takeovers (ATOs), an attack that allows them to seize control of legitimate customer accounts. Once inside a wallet holding stablecoins, they can quickly drain funds or convert them to other digital assets with little traceability. Common attack vectors include credential stuffing from large-scale data breaches, SIM swapping, and phishing campaigns designed to bypass two-factor authentication.

Money mule networks and off-ramping risk

Stablecoins’ defining strengths: speed, liquidity, and global portability, also make them attractive tools for money mule networks leveraging synthetic identities. Fraudsters leverage these networks to obscure the origin of stolen funds, moving stablecoins through dozens of wallets or cross-border exchanges before converting them to fiat. Weak or inconsistent KYC and AML standards across jurisdictions exacerbate the problem, creating safe havens for illicit off-ramps. For platforms, the threat extends beyond compliance penalties. Once stolen funds are off-ramped, the ability to recover losses or trace bad actors diminishes rapidly.

What can fintech companies do to prepare for the increase in stablecoin adoption?

Integrate identity behavior into your risk program

Knowing what is occurring within the digital walls of your business is not enough. Merchants and fintech platforms using a solution that tracks identity behavior across their global intelligence networks have the advantage of detecting bad actors as soon as they land on your site or mobile app because they’ve already been observed elsewhere.

Implement policy on stablecoin purchase thresholds

The volatility of traditional crypto as an investment can surface as volatile customer buying behavior. A crypto enthusiast may wake up with no plans to purchase crypto and quickly become influenced to purchase based on current market trends. The same is not true for stablecoins, which makes adding daily limits more practical.

Select the right trusted partner for your fraud solution

Some fraud solutions specialize in specific verticals like fintech. This may give a false impression that they have an advantage over other solutions. The reality is that fraudsters are vertical agnostic. They go where the latest exploits are. This means a solution that does not service a variety of verticals at scale has coverage gaps that allow bad actors to evade detection.

Partner with Riskified

Unleash growth with solutions designed to safeguard what matters most — your customers, their stablecoin transactions, and the trust they place in your platform.

71% of customers new to cryptocurrency businesses were already connected through Riskified’s global merchant network.

Speak with one of our experts: contact us.