US Crypto Policy Advances on Stablecoins While AI-Fuelled Crime Surges

Ari Redbord, global head of policy at TRM Labs and a former US Department of Justice prosecutor, described the recent period as one of unusually rapid regulatory coordination. TRM Labs supplies blockchain intelligence and analytics tools to law enforcement, regulators and financial institutions to trace and disrupt illicit activity on public blockchains.

"We have seen regulators move very quickly without Congress," Redbord said in an interview with Sandmark. "Just in the last couple of months we have seen the SEC promulgate guidance... on topics like DeFi, like tokenized securities... which really shows that they are trying to provide legal clarity to the space without legislation."

President Donald Trump signed the GENIUS Act – short for the Guiding and Establishing National Innovation for US Stablecoins Act – into law on 18 Jul 2025. The legislation creates the first comprehensive federal regime for payment stablecoins, digital assets engineered to maintain a fixed value, typically pegged 1:1 with the US dollar. 

It requires 100% reserve backing with high-quality liquid assets such as US dollars or short-term Treasuries, monthly public disclosures of reserve composition and clear redemption rights. Issuers face supervision by federal or qualifying state regulators, with enhanced Bank Secrecy Act obligations for anti-money laundering compliance.

The Act takes effect on the earlier of 18 months after enactment (18 Jan 2027) or 120 days after primary federal regulators finalize key rules. Recent actions include the Federal Deposit Insurance Corporation's (FDIC) April 2026 proposed rulemaking on prudential frameworks for reserve assets, redemption, capital, and risk management, as well as the Treasury's joint proposal with FinCEN (Financial Crimes Enforcement Network) and OFAC (Office of Foreign Assets Control) on anti-money laundering and sanctions compliance programmes tailored to stablecoin issuers.

Agency coordination delivers faster clarity

The US Securities and Exchange Commission (SEC) has issued guidance and staff letters on decentralized finance (DeFi) protocols and tokenized securities – blockchain representations of traditional assets such as bonds or real estate. The Commodity Futures Trading Commission (CFTC) has advanced its "crypto sprint" initiative, while coordination across the Treasury and FDIC has reached an unusually collaborative level. Redbord touted this alignment among financial regulators as a positive development that accelerates legal clarity for builders and investors.

Still, the lack of comprehensive market structure legislation remains the primary vulnerability. Without statutory definitions that clearly classify digital assets as securities or commodities – and assign oversight between the SEC and CFTC – the industry operates in a regulatory grey area. Redbord compared the situation to driving on a highway without posted speed limits: participants need clear boundaries to innovate confidently and at scale.

"We just need to know what the speed limit is," he said. "Rules of the road – what is a security, what is a commodity?"

He argued that foundational rules on asset classification would mirror the supportive environment that enabled the internet to flourish in the US. DeFi, with its permissionless protocols for lending, trading and yield generation, evolves too rapidly for immediate heavy regulation; such issues are better tackled once core classifications are settled.

The current administration's actions, including passage of the GENIUS Act and proactive agency guidance, have pushed clarity forward faster than anticipated. Redbord acknowledged inherent trade-offs, noting that executive-branch momentum can shift abruptly with political changes, reinforcing the need for durable legislation. Early industry feedback points to implementation challenges around compliance costs for reserve management and audits, though many issuers welcome the legitimacy the framework brings.

Stablecoin AML rules bolster defences against AI threats

New stablecoin-focused AML requirements directly strengthen onchain tracing capabilities, creating a tighter link between policy progress and crime mitigation at a time when threats are escalating rapidly.

Redbord reported an approximately 500% increase in AI-enabled fraud and scams over the past year. Criminals now use convincing deepfake videos and audio for highly personalised phishing attacks tailored to victims' families, businesses or recent activities – a leap beyond traditional generic scams. In one documented case, AI-generated deepfakes enabled sophisticated impersonation scams that drained millions from targeted victims through fake investment platforms and executive video calls.

Ransomware groups employ AI to automate affiliate recruitment within Ransomware-as-a-Service ecosystems on the dark net, minimising human coordination. Nation-state actors, including those linked to North Korea, have already stolen and laundered large sums from exchanges; AI tools risk scaling these operations to unprecedented levels.

TRM Labs' 2025 crypto crime report recorded $158bn in illicit flows – a record high – though this represented only about 1.2% of total crypto activity amid more than $4tn in stablecoin volume. Sanctions-related transactions, including those tied to a ruble-backed stablecoin, contributed significantly to the total.

Redbord drew a parallel to 1904, when the Ford Model T rolled off assembly lines and prompted the creation of the Federal Bureau of Investigation (FBI), as criminals gained new mobility across state lines. Blockchain combined with AI represents a similar leap in speed and scale, with bad actors among the earliest adopters.

Beacon Network strengthens industry

Industry efforts to counter these risks have advanced through deeper collaboration. TRM Labs launched the Beacon Network in August 2025 as the largest public-private partnership in crypto. It connects major platforms – including Coinbase, Binance, Kraken, OKX, Crypto.com, Robinhood, Stripe, and PayPal, which combined handle more than 85% of centralized transaction volume – with 70 global law enforcement agencies. The network enables real-time flagging of illicit addresses and rapid interdiction, often preventing funds from being withdrawn or laundered. In one success, law enforcement used the Beacon Network to alert exchanges and freeze $1.5mn in proceeds from a global scam operation before the funds could be laundered.

A persistent misconception holds that crypto transactions are anonymous. In practice, every transfer is immutably recorded on public ledgers. Effective tracing depends on attribution to known threat actors – such as ransomware groups or sanctioned entities – which frequently occurs when funds reach regulated exchanges or over-the-counter brokers.

Law enforcement teams have developed substantial expertise in blockchain analytics, yet Redbord pointed to a resource gap: more trained investigators will be required as the sector grows. He called for improved mechanisms to share private-sector onchain data with government authorities while preserving privacy. TRM focuses exclusively on threat categories and entities, not linking addresses to ordinary users absent legal process such as a subpoena.

GENIUS Act milestones

18 Jul 2025: President Trump signs the GENIUS Act into law

August 2025: TRM Labs launches Beacon Network

September 2025: Treasury issues advance notice of proposed rulemaking

December 2025: FDIC proposes application procedures for stablecoin-issuing institutions

April 2026: FDIC and Treasury release key proposed rules on prudential standards and AML compliance

18 Jan 2027: Full effective date (or earlier upon final rules)

Thoughtful rules needed for responsible scaling

Redbord emphasized that crypto, as a financial service operating at scale, requires thoughtful regulation rather than unregulated freedom. "It was always naive to think that you'd ever have financial services at scale without regulation," he said. "The reality is we need thoughtful regulation that allows the industry to grow and adapt."

Builders require confidence that government supports responsible innovation. Individuals holding self-custodied digital assets on mobile devices should exercise heightened caution: avoid unknown online contacts, particularly on social media, and verify all interactions carefully.

At TRM Labs, AI powers every layer of the platform, including the Beacon Network, to turn the same technology against criminals. The sector cannot flee innovation; it must harness it responsibly.

Over the next 12-18 months, continued agency rulemaking and potential legislative progress will test whether current momentum can harden into stable foundations for US leadership in digital assets – or whether lingering uncertainty risks pushing innovation and its economic benefits offshore.