The Bank for International Settlements (BIS) has put forward a striking proposal: assigning compliance scores to crypto assets and wallets based on their exposure to illicit activity, with those scores applied when users attempt to move funds into the traditional banking system. The idea represents a shift from identity-based anti-money laundering (AML) checks toward asset-focused monitoring, using the transparency of blockchains themselves as the key compliance tool.
The move comes at a time when criminals are increasingly favoring stablecoins over Bitcoin. In 2024, nearly 63% of crypto transactions tied to illicit activity were conducted through stablecoins, underscoring the urgency of finding better safeguards at off-ramps where digital assets are exchanged for fiat.
Under the BIS model, crypto tokens and wallets would be graded on a scale from 0 to 100. A perfect score would indicate funds originating from KYC-compliant sources, while a score of zero would flag assets tied to blacklisted or high-risk addresses. Assets in between would reflect varying levels of exposure, with exchanges and financial institutions empowered to set thresholds for which scores they are willing to accept.
This system would place a clear duty of care on off-ramp providers like exchanges, stablecoin issuers, and custodians. They could face penalties if they allow low-scoring assets to move into the financial system. At the same time, individual users might also become more accountable, with affordable scoring services giving traders and institutions the ability to verify whether tokens are “clean” before transacting. Over time, assets flagged as risky could lose value in the market, trading at a discount compared to compliant coins.
BIS envisions multiple approaches to implementation. A strict policy might allow only assets that have consistently passed through verified, KYC-approved wallets. A looser framework would simply block transactions tied to blacklisted addresses. Hybrid models could introduce conditional measures, such as requiring funds to remain for a period in whitelisted wallets or flagging those that recently interacted with suspicious accounts.
The appeal of this proposal lies in its balance. Instead of undermining the pseudonymity of blockchain, it leverages its traceability. Compliance is tied to the transaction history of the asset, not the personal identity of the user. For regulators and financial institutions, this could be a more practical way to safeguard the fiat off-ramp without forcing blockchain into a rigid, identity-centric mold.
Still, the plan raises challenges. Privacy advocates are likely to push back against what they see as creeping financial surveillance, and fragmented global adoption could limit the model’s effectiveness. Technical hurdles also remain in ensuring accurate and universally trusted scoring systems.
Even with these obstacles, the BIS proposal marks a significant step in redefining how regulators and the crypto industry could tackle AML risks. By embedding compliance into the assets themselves, it offers a potential framework for cleaner, safer, and more trustworthy integration of crypto into the global financial system.
