The United Nations Office on Drugs and Crime (UNODC) expressed deep concern about crypto’s role in facilitating illicit activities across Southeast Asia.
It notes that the existing underground banking infrastructure, including underregulated casinos, junkets, and illegal online gambling platforms, has increasingly adopted crypto as a tool for crime.
UNODC Raises Alarm Over Crypto
In its latest report, the UN agency claimed that the rise of high-risk virtual asset service providers (VASPs) has created a new avenue for criminal enterprises to operate without accountability, further entrenching these activities.
As such, UNODC called for urgent action, recommending enhanced monitoring of organized crime within casinos, junkets, and cyber fraud operations, alongside improved training for authorities in identifying sophisticated money laundering methods enabled by crypto.
The report asserted that, while not all scams in the region involve crypto, it remains a favored payment option among scammers due to the ease of rapid cross-border transactions. This reality, compounded by misinformation and inadequate law enforcement cooperation, further highlighted the urgent need for greater regulatory oversight in the crypto space, the UNODC added.
In a statement, UNODC Regional Representative for Southeast Asia and the Pacific, Masood Karimipour, said,
“Leveraging technological advances, criminal groups are producing larger scale and harder to detect fraud, money laundering, underground banking and online scams. This has led to the creation of a criminal service economy, and the region has now emerged as a key testing ground for transnational criminal networks looking to expand their influence and diversify into new business lines.”
Tether in Spotlight, Again
The UN agency also reported that Tether (USDT), particularly on the TRON blockchain, has become the preferred stablecoin for transnational criminal networks in East and Southeast Asia. These networks, involved in cyber-enabled fraud and money laundering, favor Tether for its efficiency in moving stolen funds.
While stablecoins like Tether have gained popularity among legitimate users, UNODC said that on-chain analysis reveals that USDT has significantly higher counterparty exposure to high-risk entities, including online gambling platforms, cyber fraud schemes, and high-risk exchanges.
The report also highlights that Tether has been involved in hundreds of millions of dollars in transactions with entities linked to large-scale criminal operations such as drug and human trafficking, cybercrime, and the distribution of child sexual abuse material.
Notably, some of these transactions involve wallets associated with OFAC-sanctioned entities and North Korea’s Lazarus Group, known for hacking activities.
Crypto Criticism Misplaced: Report Shows
Despite crypto often facing criticism as a tool for illicit activities, studies indicate that cash remains the preferred method for criminals. For instance, a recent report from Homeland Security Investigations (HSI) highlighted that regulated crypto platforms provide essential support to law enforcement by leveraging blockchain technology’s transparency to fight crime and enhance national security.
This is contrary to the misconceptions about their involvement in illicit finance. In fact, data from Merkle Science reveals that only 0.61% of USDT transactions and just 0.22% of USDC transactions were flagged as potentially illicit between July 2021 and June 2024, indicating a significantly lower rate of illicit activity compared to traditional finance.
Furthermore, Chainalysis noted that illicit activities constituted only 0.34% of total on-chain transactions in 2023, indicating that concerns about crypto may be overstated when compared to traditional finance.
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