BIS Proposes AML Compliance Score for Crypto Off-Ramps
The Bank for International Settlements (BIS) has published a BIS Bulletin outlining a new anti-money laundering (AML) framework that assigns an AML compliance score to crypto holdings before they are converted into fiat currency. Leveraging public blockchain transaction history, the proposal would evaluate the provenance of each crypto unit or wallet, flagging “tainted” assets linked to illicit activity. Under the plan, stablecoins—responsible for 63% of all illicit crypto flows in 2024—would be scored based on wallet histories, while Bitcoin UTXOs would carry embedded risk metrics.
Crypto off-ramps, including exchanges and payment services, would be required to check these risk scores at the point of conversion. Transactions exceeding risk thresholds could be blocked or frozen, and non-compliant entities could face fines or penalties. The BIS also recommends a “duty of care” for market participants, encouraging users and service providers to avoid handling high-risk tokens. In a fully implemented system, tainted stablecoins might trade at discounts, and scores could remain attached to tokens as they move across permissionless blockchains. The proposal aims to strengthen compliance monitoring and reduce illicit fund flows in the crypto ecosystem.
Neutral
The BIS proposal to assign an AML compliance score to crypto off-ramps is unlikely to trigger immediate market upheaval. While it introduces new compliance costs and could curb illicit flows—particularly for stablecoins—it also enhances legitimacy and institutional adoption over time. Past regulatory measures like the FATF Travel Rule had a neutral to mildly bearish short-term impact, as exchanges adapted to know-your-customer (KYC) requirements without halting market growth. In the short term, traders may face higher due diligence costs and potential delays in off-boarding fiat, exerting slight downward pressure on high-risk tokens. In the long term, improved on-chain compliance could attract institutional capital by reducing regulatory uncertainty, thus balancing any initial bearish sentiment and supporting more stable market growth.