Southeast Asia has become a hub for financial innovations, such as cryptocurrencies. However, underlying this trend, there are risks associated with unregulated crypto firms, which the United Nations Office on Drugs and Crime (UNODC) warns could pose a threat to regional safety.

Unregulated VASPs and Their Criminal Ties

In its latest report, the UNODC calls on Southeast Asian governments to criminalize the operation of unlicensed VASPs. The report revealed that some of these firms, including those with ties to known criminals, are enabling illicit transactions linked to gambling platforms and fraud schemes. One such firm reportedly facilitated transactions worth hundreds of millions of dollars for criminal networks. These bad actors are involved in large-scale drug trafficking, cybercrime, and child sexual abuse material.

Crypto, the Fast Lane for Fraudsters

While virtual assets offer speed, anonymity, and global reach, they have also become the preferred payment method for fraudsters. The report highlighted that scammers favor crypto due to its easy cross-border transactions and the public’s lack of understanding about how digital assets function. The situation is further exacerbated by weak international cooperation in investigating crypto-related crimes, making it harder to recover stolen assets or prosecute criminals across borders. According to Immunefi, a Web3 security platform, crypto losses in the third quarter of 2024 amounted to $413 million.

Pig Butchering Scheme on the Rise in Southeast Asia

Online fraud in Southeast Asia has flourished. Suspicious office blocks and casino complexes serve as nerve centers for scammers, many of whom operate in countries like Cambodia and Myanmar. A previous UN report estimated about 220,000 people are involved in scam centers in Cambodia and Myanmar alone. One of the region’s most notorious scams is the 'pig butchering' scheme.

The UNODC emphasizes the need for stricter regulation and international cooperation to prevent the use of cryptocurrencies for criminal purposes and to protect the region's populace.