Highlights

• UNODC urges Southeast Asian nations to criminalize unlicensed virtual asset service providers (VASPs).
• The agency highlights the rise of crypto scams and cyber fraud enabled by unregulated crypto platforms.
• Tether (USDT) and other stablecoins have become key tools in criminal operations across the region.

The United Nations Office on Drugs and Crime (UNODC) has raised alarm about the growing threat of crypto scams and cyber fraud in Southeast Asia.

In a report released on Monday, the agency called on Southeast Asian nations to take immediate action by criminalizing the operations of unlicensed virtual asset service providers (VASPs). UNODC highlighted that several unregulated firms are facilitating illegal transactions linked to organized crime, including drug and human trafficking, cybercrime, and online gambling.

According to the report, the ease of cross-border transactions, combined with misinformation about how cryptocurrency works, has made it a popular payment method for scammers. UNODC warned that some of these unlicensed crypto firms are closely tied to high-risk gambling platforms and fraudulent schemes, enabling millions of dollars in transactions for criminal networks.

“It is more critical than ever for governments to recognize the severity, scale, and reach of this truly global threat,” said Masood Karimipour, UNODC’s regional representative for Southeast Asia.

Karimipour stressed the need for stronger crypto compliance and cryptocurrency legislation to address these emerging challenges in the region.

Tether and Stablecoins in the Spotlight

One of the main concerns highlighted by UNODC is the growing use of stablecoins, particularly Tether (USDT), in illegal activities.

The report pointed out that Tether, especially on the TRON blockchain, has become a preferred tool for transnational criminal networks in Southeast Asian nations. These networks use Tether for its efficiency in moving large sums of stolen funds across borders, often involving wallets linked to sanctioned entities like North Korea’s notorious Lazarus Group.

While stablecoins like Tether are commonly used in legitimate cryptocurrency transactions, UNODC noted that they also have a higher exposure to high-risk entities, including illegal online gambling platforms and cyber fraud operations.

“Stablecoins have become a critical component of the criminal ecosystem, allowing bad actors to efficiently launder their proceeds,” UNODC stated in its report.

UNODC's findings emphasize the urgent need for Southeast Asian nations to implement stricter cryptocurrency legislation and enforce stronger regulatory oversight on virtual asset service providers.

By requiring VASPs to operate under licenses, governments can better track and disrupt the flow of funds used for illicit purposes.

Increased Rate of Organized Crime Due to New Technologies

In addition to the rise in unregulated crypto activities, UNODC also warned about the increasing sophistication of organized crime networks in Southeast Asia.

Criminal groups are adopting new technologies, including artificial intelligence (AI) and deep fake techniques, to carry out scams more effectively. These scams range from impersonation fraud and job scams to more complex operations, such as romance scams, where criminals lure victims into investing in fraudulent cryptocurrency platforms.

UNODC’s report estimates that as many as 220,000 people in Cambodia and Myanmar alone are working in scam centers, often without their consent.

The agency also reported an uptick in “pig butchering” scams, where fraudsters develop long-term online relationships with their victims before convincing them to invest in fake crypto platforms. The report further suggested that criminals are diversifying their methods, adding phishing scams and asset-recovery scams to their arsenal.

To combat these growing threats, UNODC has recommended improved training for authorities in monitoring organized crime involvement in sectors like casinos, junkets, and cyber fraud operations.

Enhanced cooperation between law enforcement agencies across borders is also essential to effectively address crypto-related crime and improve crypto compliance in the region.

Final Notes

As Southeast Asian nations continue to grapple with the rapid rise of crypto scams and cyber fraud, the UNODC’s call for action underscores the need for stricter regulation and enforcement.

Criminalizing unlicensed VASPs, enhancing crypto compliance, and strengthening cryptocurrency legislation will be key steps in curbing illicit activities fueled by the misuse of digital assets.

With organized crime networks increasingly leveraging technology to their advantage, governments in the region must act quickly to stay ahead of these evolving threats.