The stablecoin sector, once heralded as cryptocurrency’s bridge to mainstream finance, now finds itself navigating treacherous regulatory waters. Bridge, a stablecoin startup backed by payments giant Stripe, has emerged at the center of a growing controversy involving sanctions compliance and fraudulent activity—a development that threatens to reshape how the industry approaches regulatory oversight and user verification.

According to The Information, Bridge has encountered significant challenges related to sanctioned entities and scammers utilizing its platform, raising questions about the startup’s compliance infrastructure at a critical juncture in its development. The revelations come as Stripe, which acquired Bridge for $1.1 billion in October 2024, works to integrate stablecoin capabilities into its broader payments ecosystem—a strategic bet that digital dollars will become a cornerstone of global commerce.

The compliance issues facing Bridge underscore a fundamental tension in the stablecoin industry: the desire to provide fast, borderless payments while maintaining the rigorous anti-money laundering and sanctions screening that traditional financial institutions are required to implement. For Bridge, which has positioned itself as an enterprise-focused stablecoin platform, these challenges carry particular weight as it seeks to serve businesses that demand institutional-grade compliance standards.

The Stripe Acquisition and Strategic Imperatives

Stripe’s acquisition of Bridge represented one of the largest cryptocurrency deals of 2024, signaling the payments company’s conviction that stablecoins will play a central role in the future of digital commerce. The deal, which valued Bridge at $1.1 billion, gave Stripe immediate access to stablecoin infrastructure and expertise at a time when traditional payment rails are increasingly seen as slow and expensive for cross-border transactions.

Bridge’s technology enables businesses to accept stablecoin payments and convert them to traditional currency, or vice versa, through a single API integration. The platform supports multiple stablecoins including USDC and USDT, allowing merchants to tap into the growing ecosystem of digital dollar users without managing the technical complexity of blockchain infrastructure themselves. This abstraction layer has made Bridge attractive to enterprises seeking exposure to stablecoin payments without building proprietary systems.

However, the compliance challenges now facing Bridge threaten to complicate Stripe’s integration plans. As a regulated payments company operating in more than 45 countries, Stripe maintains extensive compliance programs designed to prevent money laundering, terrorist financing, and sanctions violations. Any deficiencies in Bridge’s compliance infrastructure could potentially expose Stripe to regulatory scrutiny or require significant remediation efforts that delay the rollout of stablecoin capabilities to Stripe’s merchant base.

Sanctions Screening in the Stablecoin Sector

The issue of sanctions compliance has become increasingly prominent in the cryptocurrency industry as regulators worldwide intensify their focus on digital assets. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) maintains comprehensive sanctions lists that financial institutions must screen against, and stablecoin platforms are no exception. Recent enforcement actions have demonstrated that cryptocurrency businesses face the same compliance obligations as traditional financial institutions.

According to industry experts, stablecoin platforms face unique challenges in implementing effective sanctions screening. Unlike traditional banks that collect extensive customer information during account opening, many cryptocurrency platforms initially adopted lighter verification processes to reduce friction and accelerate user adoption. This approach, while effective for growth, has created compliance gaps that regulators are now demanding be closed.

The decentralized nature of blockchain technology adds another layer of complexity. While stablecoin issuers can freeze tokens in specific wallet addresses, the pseudonymous nature of blockchain addresses makes it challenging to identify beneficial owners before transactions occur. This has led to a cat-and-mouse dynamic where compliance teams must constantly update their screening processes to identify sanctioned actors who may be using intermediaries or obfuscation techniques to access stablecoin platforms.

The Scammer Problem and Platform Integrity

Beyond sanctions concerns, Bridge has also grappled with scammers exploiting its platform—a problem that has plagued the broader cryptocurrency industry but carries particular reputational risks for a company backed by Stripe. Fraudsters have increasingly turned to stablecoins as a preferred medium for scams, leveraging the speed and irreversibility of blockchain transactions to move funds quickly before victims can seek recourse.

Common scam patterns involving stablecoins include pig butchering schemes, where fraudsters build relationships with victims over time before convincing them to transfer funds to fraudulent investment platforms; romance scams that culminate in requests for stablecoin transfers; and fake investment opportunities promising unrealistic returns. The use of stablecoins in these schemes offers scammers several advantages over traditional payment methods, including faster settlement times, lower transaction costs for international transfers, and reduced risk of chargebacks.

For Bridge, addressing the scammer problem requires implementing sophisticated fraud detection systems that can identify suspicious transaction patterns without creating excessive friction for legitimate users. This balance is particularly challenging for a platform seeking to serve enterprise customers who expect seamless payment experiences. Industry observers note that overly aggressive fraud prevention measures can result in false positives that block legitimate transactions, potentially damaging customer relationships and platform reputation.

Regulatory Pressure and Industry-Wide Implications

The compliance challenges facing Bridge occur against a backdrop of intensifying regulatory scrutiny of the stablecoin sector. Lawmakers and regulators in the United States and internationally have identified stablecoin regulation as a priority, with multiple legislative proposals under consideration that would establish comprehensive oversight frameworks for digital dollar issuers and service providers.

In the United States, proposed stablecoin legislation would likely require issuers to maintain reserves equivalent to outstanding tokens, submit to regular audits, and implement robust compliance programs comparable to those required of money transmitters and banks. Payment platforms like Bridge that facilitate stablecoin transactions would face their own set of regulatory requirements, including customer due diligence, transaction monitoring, and suspicious activity reporting obligations.

The European Union has moved more quickly than the United States in establishing stablecoin regulations through its Markets in Crypto-Assets (MiCA) framework, which took effect in stages throughout 2024. MiCA imposes stringent requirements on stablecoin issuers and service providers operating in EU member states, including capital requirements, reserve management standards, and comprehensive compliance obligations. Companies seeking to operate globally must navigate this patchwork of regulatory regimes, each with distinct requirements and enforcement approaches.

Enterprise Adoption and Compliance Requirements

The compliance issues facing Bridge carry particular significance given the platform’s focus on enterprise customers. Large corporations considering stablecoin adoption for treasury management, cross-border payments, or customer transactions conduct extensive due diligence on their service providers, evaluating not just technical capabilities but also regulatory compliance and risk management practices.

Enterprise customers typically require their payment providers to maintain compliance programs that meet or exceed industry standards, including regular third-party audits, robust transaction monitoring systems, and clear policies for handling regulatory inquiries. Any deficiencies in these areas can disqualify a vendor from consideration or trigger contract termination clauses if discovered after implementation. For Bridge, demonstrating compliance excellence is essential to winning and retaining the enterprise customers that represent its core market.

The stakes are particularly high given Stripe’s reputation as a trusted payments partner to millions of businesses worldwide. Stripe has built its brand on reliability, security, and compliance—attributes that have enabled it to process hundreds of billions of dollars in payments annually for businesses ranging from startups to Fortune 500 companies. Any compliance failures at Bridge could potentially tarnish Stripe’s broader reputation and complicate its relationships with banking partners and regulators.

Technology Solutions and Industry Innovation

Despite the challenges, the stablecoin industry is developing increasingly sophisticated tools to address compliance and fraud prevention. Blockchain analytics companies have emerged as critical infrastructure providers, offering services that help platforms identify suspicious addresses, trace fund flows, and assess transaction risk in real-time. These tools leverage machine learning algorithms and extensive databases of known bad actors to flag potentially problematic transactions before they settle.

Some platforms are implementing tiered verification systems that apply different levels of scrutiny based on transaction size, user history, and risk indicators. Small transactions from established users might receive minimal screening, while large transfers or transactions involving new accounts trigger enhanced due diligence procedures. This risk-based approach, common in traditional finance, allows platforms to allocate compliance resources efficiently while maintaining appropriate oversight.

Industry participants are also exploring technological solutions that could fundamentally alter the compliance equation. Decentralized identity systems promise to enable users to prove their identity and compliance status without repeatedly submitting personal information to multiple platforms. Zero-knowledge proof technologies could allow users to demonstrate they are not on sanctions lists without revealing their full identity. While these innovations remain largely experimental, they represent potential long-term solutions to compliance challenges that currently require centralized verification processes.

The Path Forward for Bridge and Stripe

For Bridge and Stripe, addressing the current compliance challenges will likely require significant investment in technology, personnel, and processes. Industry observers expect Stripe to leverage its extensive compliance expertise and resources to strengthen Bridge’s systems, potentially implementing Stripe’s own compliance frameworks and controls across the stablecoin platform. This integration process, while potentially time-consuming and expensive, could ultimately position Bridge as a compliance leader in the stablecoin sector.

The outcome of Bridge’s compliance remediation efforts will have implications extending far beyond a single company. As one of the most prominent stablecoin platforms backed by a major payments company, Bridge’s approach to sanctions screening and fraud prevention will likely influence industry standards and regulatory expectations. Success in building robust compliance systems while maintaining user experience could provide a template for other platforms seeking to serve enterprise customers. Conversely, continued struggles could reinforce regulatory skepticism about the industry’s ability to meet traditional financial services compliance standards.

The broader stablecoin industry watches these developments closely, recognizing that the sector’s long-term viability depends on demonstrating that digital dollars can circulate through compliant, well-regulated channels. As stablecoins transition from cryptocurrency niche product to mainstream payment instrument, the compliance infrastructure supporting them must evolve accordingly. Bridge’s journey through this transition, backed by Stripe’s resources and reputation, may well determine whether stablecoins fulfill their promise of revolutionizing global payments or remain confined to cryptocurrency-native use cases where regulatory oversight remains limited.