Why Standard Chartered Advocates Use-Case-Based Compliance
On October 21, 2026, Standard Chartered published an analysis of controls for institutional stablecoin adoption. The bank argued that financial institutions should begin with the customer's actual objective when determining appropriate monitoring measures, rather than relying exclusively on the technical characteristics of blockchain transactions.
Stablecoins are increasingly being considered for cross-border business payments, treasury management, merchant settlements, and digital asset trading. These activities require financial institutions to evaluate transaction purposes, counterparties, and potential risks. Although they may use the same blockchain network, their underlying business activities and risk profiles can differ significantly.
For example, a company paying an established overseas supplier may present a different risk profile from a customer transferring a large amount to an unfamiliar wallet. A monitoring system that relies primarily on transaction value or wallet risk scores may generate unnecessary alerts while overlooking activity that is inconsistent with a customer's business profile.
Standard Chartered's approach does not mean reducing baseline compliance requirements. Instead, it calls for controls proportionate to the use case. Risks involving issuers, reserves, redemption, custody, blockchain networks, and jurisdictions must remain part of the overall assessment.
Why Wallet Screening Alone Is Not Enough
Know Your Transaction (KYT) solutions can trace fund movements, identify high-risk addresses, and analyze connections between transactions. However, on-chain data does not always explain the economic purpose of a payment or establish the real-world relationship between the sender and recipient.
Consider a business that regularly pays a long-term overseas supplier in stablecoins. If the payments are consistent with its historical activity, a system relying only on wallet labels and transfer amounts may struggle to distinguish legitimate commercial payments from suspicious transactions with similar on-chain characteristics.
Conversely, the absence of an obvious risk label does not guarantee that a transaction is safe. Newly created wallets, complicated intermediary transfers, and activity inconsistent with a customer's established behavior may all require further investigation.
Financial institutions should therefore combine blockchain analytics with customer due diligence, transaction purposes, historical behavior, and relevant business documentation. Customer risk profiles and use-case-specific monitoring rules can help compliance teams determine which alerts warrant escalation.
How Digital Asset Platforms Can Build Use-Case-Based KYT and AML Controls
Exchanges, custodians, and stablecoin payment providers should first classify their activities into practical risk scenarios, such as corporate payments, merchant settlements, treasury transfers, customer withdrawals, and digital asset investment. Different scenarios may require different monitoring indicators, while remaining subject to applicable baseline legal requirements.
Second, platforms should develop multidimensional risk assessments incorporating transaction value, frequency, source of funds, counterparty relationships, wallet risk, and historical customer behavior. When an alert is triggered, investigators should review the customer's circumstances instead of relying exclusively on a single risk score.
Third, firms need clear investigation and governance procedures. They should document alert triggers, supporting evidence, decisions, and any required reporting, while regularly updating monitoring rules to reflect emerging risk patterns. Institutions handling both fiat and stablecoin payments should also reconcile relevant records where possible to help compliance teams understand the complete flow of funds.
Standard Chartered's analysis highlights that institutional stablecoin adoption requires more than blockchain monitoring tools. It requires a risk governance framework aligned with the economic purpose of each activity. KYT provides transaction-level risk signals, while customer due diligence, business-context verification, and continuous monitoring contribute to a more complete AML framework.