Banks Push Tighter Crypto AML Rules as Coinbase Hits Back on Illicit Use Claims

U.S. banking lobbyists are turning up the heat on crypto again, this time with a fresh demand for stricter AML and sanctions rules aimed squarely at stablecoins and other digital asset intermediaries. Coinbase and other industry voices say the banking crowd is cherry-picking scary numbers to make crypto look like a criminal sewer while ignoring the far uglier record of traditional finance.

• BPI is calling for tougher crypto AML and sanctions rules
• Coinbase says illicit activity is a small share of total on-chain volume
• Stablecoins are in the crosshairs of U.S. regulators
• Traditional finance still launders a staggering amount of money

The latest salvo comes from the Bank Policy Institute (BPI), a Washington, DC-based banking trade group, which released a report bluntly titled “Time for a Reckoning on AML and Crypto.” AML stands for anti-money laundering — the rules and controls meant to stop dirty money from moving through financial systems. In plain English: know your customer, screen for sanctions, monitor transactions, and report suspicious activity before criminals use the rail as a laundromat.

BPI argues that crypto, especially stablecoins — digital tokens pegged to assets like the U.S. dollar — is increasingly being used by money launderers and terrorist financiers. The group says crypto firms do not face obligations equivalent to the financial-crime safeguards banks already deal with, and that gap needs to be closed through market structure legislation, meaning a law that would spell out how crypto businesses are regulated in the U.S.

That is BPI’s big push: get Congress to force crypto into a tougher compliance box before the current setup turns into a bigger headache for national security and law enforcement. The report also points to the Treasury Department’s Notice of Proposed Rulemaking on AML and sanctions obligations for stablecoin issuers — the companies that create and manage stablecoins — as proof that regulators are already moving in that direction.

To back up its case, BPI leans on data from Chainalysis’s 2026 Annual Report. According to the banking group, illicit crypto addresses received $154 billion in 2025, a figure it says was up 162% year over year. BPI also says crypto activity tied to suspected human trafficking reached “hundreds of millions of dollars” in 2025, rising 85% year over year. In the report’s own words, crypto “is funding serious crimes” and the “intersection of cryptocurrency and suspected human trafficking intensified in 2025.”

That kind of language is designed to land like a brick. It also predictably triggered a fast and forceful response from the industry.

Coinbase Chief Policy Officer Faryad Shirzad pushed back hard, saying BPI’s framing is misleading because it focuses on headline-grabbing totals without proper context. His core argument is simple: yes, illicit activity exists in crypto, but the scale is still tiny relative to the overall size of the network.

“the numbers do not support a framing that implies crypto is uniquely or overwhelmingly dominated by criminal use.”

Shirzad said the same Chainalysis report indicates illicit activity is under 1% of total on-chain volume — that is, the total amount moving across blockchain networks. He also cited TRM Labs, which he said estimates the illicit share at 1.2%. According to Shirzad, both firms have shown those levels have stayed at or below that range for years. So, yes, bad actors are present. No, they are not the whole damn ecosystem.

He also widened the comparison to the old financial guardrails everyone pretends are pristine. Shirzad cited the UN Office on Drugs and Crime (UNODC), which estimates that 2%–5% of global GDP is laundered through the traditional financial system. That’s a massive number. It’s also a reminder that banks, correspondent banking, shell companies, and offshore plumbing have been doing filthy work for decades. Anyone pretending legacy finance is morally cleaner is selling fairy dust with a blazer on.

Shirzad was careful not to argue for a lawless crypto free-for-all. He said stablecoin issuers and exchanges should invest in AML efforts, sanctions screening, and intelligence sharing. That matters. The industry’s best rebuttal is not “leave us alone,” but rather “apply the rules fairly and proportionally.” Crypto absolutely has compliance gaps. Some projects are better than others. Some are outright garbage. But there’s a difference between targeted enforcement and using financial integrity as a blunt weapon to protect incumbents.

That’s the real fight here. BPI wants something close to regulatory equivalence — the same kind of financial-crime controls banks face — for crypto intermediaries, especially stablecoin issuers. The crypto side says regulation is necessary, but the banking lobby is trying to drag the whole sector into the same swampy compliance regime while legacy finance gets to keep acting like it didn’t spend years enabling far larger volumes of laundering.

Stablecoins are the obvious flashpoint because they sit at the intersection of crypto trading and real-world payments. They are not just speculative toys; they are increasingly used for transfers, settlement, remittances, and dollar access in markets that want faster rails than the banking system can provide. That utility is exactly why regulators care. It is also why banks care. If stablecoins become a credible payment layer, they threaten the tollbooth model that has padded traditional finance for generations. Funny how “consumer protection” tends to get louder when incumbents feel their rent stream wobbling.

None of this means crypto gets a free pass. It doesn’t. Bad actors exploit every financial rail: cash, banks, shell firms, prepaid cards, offshore entities, and yes, blockchain networks. Crypto’s open rails and borderless transfer features can make abuse easier when compliance is weak or deliberately gamed. That is not a fantasy, and it should not be waved away by tribal fan fiction. But the existence of abuse is not the same thing as proving the entire sector is uniquely criminal.

The policy problem is not whether illicit use exists in crypto. It does. The problem is whether regulators will measure it honestly and regulate it proportionally, or whether they’ll let banking lobbyists use AML as a cudgel to choke off competition and preserve the status quo. If the goal is stopping money laundering and terrorist financing, then the target should be the bad actors and the weak controls — not just whichever rail makes old money nervous.

What is BPI asking for?

BPI wants stricter AML and sanctions rules for crypto, especially stablecoins and other intermediaries, through U.S. market structure legislation.

Why is BPI targeting crypto now?

The group says digital assets are increasingly being used by money launderers and terrorist financiers, and that current rules do not match the obligations banks already face.

What data is BPI using?

BPI cites Chainalysis’s 2026 Annual Report, including its claim that illicit crypto addresses received $154 billion in 2025, up 162% year over year, plus growing links to suspected human trafficking.

How did Coinbase respond?

Coinbase Chief Policy Officer Faryad Shirzad said BPI is overstating the threat by focusing on raw numbers without context and ignoring that illicit activity is a small share of total on-chain volume.

How small is illicit crypto activity, according to the rebuttal?

Shirzad said Chainalysis puts it under 1% of total on-chain volume, while TRM Labs estimates it at 1.2%.

Is traditional finance cleaner?

No. Shirzad cited UNODC estimates that 2%–5% of global GDP is laundered through the traditional financial system.

Does Coinbase reject regulation?

No. Shirzad said stablecoin issuers and exchanges should still invest in AML efforts, sanctions screening, and intelligence sharing.

What is the bigger policy fight?

Whether lawmakers will build fair, effective crypto regulation or use AML rules to entrench legacy banks and slow down financial competition.

Is crypto uniquely criminal?

No. It has real illicit use cases, but the data cited by critics does not support the claim that crypto is overwhelmingly dominated by crime.

The “reckoning” BPI wants may be less about cleaning up finance and more about deciding who gets to define the rules of the road. Crypto needs serious compliance. Banks do too. What it does not need is another round of sanctimonious theater from institutions that helped build the very laundering machine they now pretend to be shocked by.