US Banks Urge Stricter Crypto Regulation Amid Growing Illicit Activity

US banking industry leaders are calling for stricter anti-money laundering (AML) and sanctions rules for cryptocurrency businesses, citing growing concerns over illicit activity involving digital assets.

The Bank Policy Institute (BPI), a Washington D.C.-based trade association, released a report titled 'Time for a Reckoning on AML and Crypto' which argues that Congress should address the imbalance between traditional banks and crypto firms in AML obligations.

The BPI claims that cryptocurrencies and stablecoins are being increasingly used by money launderers and terrorist financiers, and that crypto businesses do not face equivalent legal obligations to safeguard the financial system from abuse. The institute points to data from Chainalysis showing that illicit crypto addresses received $154 billion in 2025, a 162% year-over-year increase.

Crypto leaders have pushed back against the BPI's report, arguing that the data on illicit crypto activity is not as severe as claimed. Coinbase's Chief Policy Officer Faryad Shirzad noted that the same Chainalysis report concludes that illicit activity remains under 1% of total on-chain volume, and that estimates from TRM Labs put the figure at 1.2%. He also pointed out that the United Nations Office on Drugs and Crime estimates that 2-5% of global GDP is laundered through traditional financial systems.

Shirzad emphasized that none of this excuses crypto from scrutiny, but rather highlights the need for a more nuanced approach to regulation. He acknowledged that bad actors exploit every financial rail and that stablecoin issuers and exchanges should invest in AML efforts, sanctions screening, and intelligence sharing.