The Bank for International Settlements floated a compliance score for crypto-to-fiat off-ramps, using transaction history to flag and potentially freeze “tainted” assets.
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The Bank for International Settlements (BIS) has proposed a provenance-based risk score system for crypto-to-fiat off-ramps.
In its Wednesday BIS , the institution outlined “an approach to anti-money laundering compliance for cryptoassets,” recommending that a compliance score be assigned to crypto holdings before they are exchanged for fiat currency.
“An AML compliance score based on the likelihood that a particular cryptoasset unit or balance is linked with illicit activity may be referenced at points of contact with the banking system,” the document said. The score would then be used to prevent inflows of illicit funds and encourage a “duty of care” among crypto market participants.
The BIS said existing ) approaches relying on trusted intermediaries have “limited effectiveness” in the context of crypto. Public blockchain transaction histories could provide valuable tools for compliance monitoring, it said.
The BIS claims that, since 2022, stablecoins have overtaken Bitcoin () “as the asset of choice among criminals using crypto.” The document cites reports by crypto forensics firms and showing that as of 2024, stablecoins accounted for about 63% of all illicit transactions.
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The BIS’s AML compliance scores would reference Bitcoin unspent transaction outputs (UTXOs) or wallets in the case of stablecoins. There would be risk thresholds that would determine whether to allow or deny off-ramp requests. The institution recommends that crypto off-ramps should be responsible for respecting such a system.
“Imposing a duty of care on these entities would incentivise them to avoid accepting or paying out tainted coins, as failure to comply could result in fines or other penalties.”
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The proposal also noted that individual holders could face compliance requirements. BIS said that while users may have received tainted assets in good faith if compliance information was scarce, “such an argument would be less persuasive if there were widespread and affordable compliance service providers.”
BIS predicts that, in such a system, tainted stablecoins could trade at a discount. Risk scores could also “accompany the token as it moves within the permissionless blockchain — embedding the score into the UTXO or wallet itself.”
According to BIS, this would lead to a duty of care being imposed on users as well, potentially influencing behavior in fully decentralized transactions.
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