For most of the past decade, a stablecoin or crypto payout was checked the same way: the user pasted an address—perhaps clicked a checkbox to confirm it was theirs—and the platform sent the funds. If the address was wrong, or belonged to someone else, the transfer was final regardless. That wasn’t a huge problem in a less regulated market, but today, processing that kind of payout without doing your due diligence could put your business in hot water.
Now that more businesses are processing withdrawals in stablecoin or crypto—particularly prediction markets, iGaming platforms, marketplaces, fintechs and financial institutions—compliant payouts to unhosted (self-custodial) wallets are becoming increasingly important.
While previously the typical check was a screenshot or a checkbox attestation, today’s regulatory expectations are much stricter. The question payout teams are now asked is not "is this a valid address?" but "can you prove who controls it?"
The shift in stablecoin and crypto payouts
Three things shifted over the past two years.
Stablecoins are under closer scrutiny
The Financial Action Task Force’s June 2025 targeted update on virtual assets observed that most onchain illicit activity now involves stablecoins. Chainalysis estimated that stablecoins accounted for 84% of illicit transaction volume in 2025, as reported by The Block in January 2026. Those figures describe a small share of overall activity, but they explain why supervisors pay closer attention to where stablecoin payouts end up.
The Travel Rule applies to more regions
In the same update, FATF reported that 99 jurisdictions had passed or were in the process of passing Travel Rule legislation. Requirements differ from one jurisdiction to the next, but the direction is consistent: information about the parties to a transfer is expected to travel with it.
Self-custodial wallets were included in regulation
In the European Union, the recast Transfer of Funds Regulation, Regulation (EU) 2023/1113, has applied since 30 December 2024. Among other things, it requires crypto-asset service providers handling a transfer of more than EUR 1,000 to or from a self-hosted address to take adequate measures to assess whether that address is owned or controlled by their customer. The European Banking Authority's Travel Rule Guidelines, published in July 2024, list ways to do that, including having the customer sign a specific message with the wallet.
And it’s not just the European Union: comparable requirements for self-hosted wallets apply in jurisdictions including Switzerland, the United Kingdom, Singapore and the UAE, though thresholds and accepted methods vary.
How Wallet Verification fits into the stablecoin and crypto payout flow
Wallet verification solves problems and provides the necessary requirements for businesses such as:
A verifiable record of proof of control
Non-custodial (self-custodial or unhosted) wallets are transparent accounts on the blockchain. Every transaction they make is viewable by anyone using a blockchain explorer. What the chain can’t show is who controls the wallet. Wallet verification links the address to the customer on your platform, with a record you can produce when supervisors ask.
A way to confirm your customer controls the destination wallet
Payouts to an unhosted wallet cannot be recalled, since transactions on the blockchain are immutable. A mistyped or substituted address is a permanent loss, and manual review is the main defense many teams have. With wallet verification, businesses can confirm the customer controls the destination wallet before funds move, removing copy-paste and wrong-address errors.
5 compliance musts for businesses processing stablecoin payouts
1. Evidence replaces attestation
A user confirming "this is my wallet" with a checkbox or an in-wallet screenshot is an attestation. A signature or transaction from that wallet is evidence. Regulators increasingly expect evidence of ownership or control, and businesses processing crypto and stablecoin payouts need to keep a record to show that evidence.
2. Verification has to happen before money moves
Because payouts are final, a check that runs afterwards can only explain a loss, not prevent it. Verification, screening and any required Travel Rule information need to sit in the payout flow, ahead of the transfer, with the outcome enforced automatically rather than left to manual follow-up.
3. The method matters
Regulatory guidance points to technical methods such as signing a message with the wallet or a “satoshi test” (microtransaction). The former proves control directly, with no funds moving and no gas required, whereas the latter involves the user sending a real transaction and paying gas fees. Both produce a record of proof of control.
4. Records have to fit existing controls
A new compliance step is only useful if the compliance team can use what it produces. Verification records that arrive in formats existing systems already read avoid a parallel process, and keep the evidence alongside the rest of a customer's file.
5. Friction belongs on the first payout, not every payout
Users accept a verification step when it is quick and happens once. Platforms that verify a wallet at first payout and reuse the result can keep later withdrawals fast while still holding the evidence.
What Wallet Verification unlocks for stablecoin and crypto Payouts
WalletConnect's Wallet Verification lets users prove control of their wallet with a signature before an irreversible transfer. WalletConnect chose this method so the end user doesn’t have to spend real funds or pay gas fees. Instead, all they do is connect their wallets, and sign a message using an end-to-end flow you can integrate into the payout you already offer.
Beyond the basic Wallet Verification process, WalletConnect also offers extra features to support your compliance requirements. Each check confirms the destination address with no copy-pasting, can run sanctions and IP screening against OFAC, UK, UN and EU lists, and returns an audit-ready record to your systems, with an export-ready version available via the WalletConnect dashboard. If you want to further simplify your Travel Rule compliance stack, you can also incorporate our Travel Rule capture in the same step.
Not only that, but verification can be captured once and reused for later payouts to the same wallet, in line with your own risk policy. It is also designed to fit into your existing controls if you own the Payouts flow yourself. However, if you’re still in your build phase, WalletConnect can also provide you with an end-to-end stablecoin and crypto Payouts method.
How to approach stablecoin and crypto payouts
Requirements will keep evolving. Thresholds, accepted verification methods and the treatment of self-hosted wallets still differ by jurisdiction, and some frameworks remain under review. The likely direction is not uniform rules, but a common expectation: firms that pay out to self-custodial wallets should be able to show who controlled the destination, how they established it and when.
For payout teams, that points toward verification as standard infrastructure, built into the flow once and reused across markets, rather than a manual check rebuilt for each new jurisdiction.
Ready to incorporate Wallet Verification into your payouts flow? Meet with the WalletConnect team to enquire about how it could help your business.