The Bank for International Settlements published a Bulletin setting out an alternative approach to anti-money laundering compliance for cryptoassets on permissionless public blockchains. It proposes leveraging public on-chain transaction histories to generate an AML compliance score for a given bitcoin unit or stablecoin balance and using that score at conversion points into fiat currency, particularly where cryptoassets meet the banking system, to help prevent illicit proceeds from entering conventional finance and support a stronger “duty of care” among market participants. The Bulletin argues that intermediary-based AML frameworks have limited effectiveness once funds move to unhosted wallets on permissionless blockchains, and that account freezing by stablecoin issuers is not realistic as a general solution for day-to-day activity. It notes stablecoins have overtaken bitcoin as the preferred cryptoasset for criminal use since 2022 and accounted for about 63% of illicit transactions in 2024, with estimated illicit crypto volumes of USD 51.3 billion. The proposed scoring framework spans a spectrum from stringent allow-list approaches requiring that assets have passed through KYC-checked addresses, through intermediate tests using multiple criteria and patterns, to more permissive deny-list approaches focused on links to known illicit addresses. It also flags that jurisdictions could tailor the definition of illicit activity, including breaches of foreign exchange regulations, and that similar scoring concepts could be applied to other compliance objectives such as taxation and consumer protection.

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