Policy & Regulation·Jan 16, 2024
United Nations report cites popularity of USDT for fraud in Southeast Asia
USDT, the leading U.S. dollar stablecoin issued by Tether, has been highlighted as a major conduit for money laundering and scams in Southeast Asia, according to a United Nations report released on Monday.Photo by Mathias Reding on UnsplashIllicit stablecoin useThe report has been titled “Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden and Accelerating Threat.” It points out that online gambling platforms, particularly those operating illicitly, are among the favored channels for cryptocurrency-based money launderers, with a notable emphasis on the use of Tether or USDT. In a foreword to the report, Jeremy Douglas, the UN’s Regional Representative for Southeast Asia and the Pacific, noted that technology had aided crime networks in Asia, and in particular, the Mekong Delta region. Developing upon that idea, he added:”This has necessitated a revolution in the regional underground banking architecture, resulting in the development of systems and infrastructure capable of moving and laundering massive volumes of state-backed fiat and cryptocurrencies.”The report itself asserts that illegal and under-regulated crypto exchanges have become “foundational pieces of the banking architecture used by organized crime.” The document highlights law enforcement efforts in disrupting multiple money laundering networks linked to the illicit transfer of Tether funds. Last August, Singaporean authorities dismantled a network through an operation, recovering approximately $735 million in both cash and cryptocurrency. ‘Pig butchering’The UN report further suggests that USDT has been extensively employed in various underground fraud activities, including so-called "pig butchering" romantic scams. Last November, Tether froze $225 million in stolen USDT following investigations by Tether in collaboration with crypto exchange OKX and the U.S. Department of Justice. The money had been held in self-custodied wallets associated with an international human trafficking group in Southeast Asia orchestrating a pig-butchering scam. In December, Tether CEO Paolo Ardoino informed U.S. legislators in a shared letter that the company has enlisted the U.S. Secret Service and Federal Bureau of Investigation onto its platform. Later that month, the Chinese authorities uncovered a massive underground banking operation that was designed to evade the country’s foreign exchange controls. There was more related activity in December when it emerged that USDT has been integrated into the shadow economy in Cambodia, against a backdrop of the currency being prohibited for the purpose of trade within the Southeast Asian country. TRM Labs reportIn July of last year, a report by blockchain analytics firm TRM Labs, found that pro-ISIS terrorist groups in Central and Southeast Asia and the Middle East are increasingly using cryptocurrency, with a particular preference for USDT transacted over the Tron blockchain network. The UN report cites the popularity of USDT among those engaged in cyber-fraud and online casino operations, located in Myanmar, along the border with Thailand. Throughout 2023, Tether witnessed a notable expansion in its share of the global stablecoin supply, growing from 50% to 71%. At the time of writing, USDT has a market cap of $95 billion with stablecoins having an overall market capitalization of $134 billion. The UN's findings raise concerns about the stablecoin's role in facilitating illicit activities and underscore the need for enhanced regulatory scrutiny within the rapidly evolving crypto landscape.
