Title: Shadow Economy Thrives: Cryptocurrency Financial Crime in Cambodia Sparks Concerns Amidst Tether’s Popularity
Tether (USDT) Infiltrates Cambodia’s Shadow Economy
In the heart of Phnom Penh, Cambodia’s capital city, bustling Chinese expat neighborhoods host secretive 24-hour currency exchanges. Neon signs offer clandestine services, including the exchange of Chinese yuan for Tether (USDT), a cryptocurrency favored for money transfers in and out of China, gambling, and cashing out cyber scam profits. Despite Cambodia’s cryptocurrency trading ban, USDT’s low fees and no transaction restrictions have insidiously infiltrated the country’sshadow economy.
USDT’s Role in Legitimate Trading and Illicit Economy
Currency exchanges in Phnom Penh facilitate both legitimate trading and a workaround for China’s onerous currency controls. However, the secretive dealings of USDT are raising concerns due to its increasing presence in Cambodia’s illicit economy.
- In November 2022, the US Department of Justice seized nearly US$9 million in assets allegedly tied to USDT wallets involved in online scams across Southeast Asia.
- Tether Holdings, the company behind USDT, reportedly froze an additional US$225 million linked to notorious “pig butchering” scams in the region.
The Origins of Seizures and the Role of Southeast Asia
The origins of these seizures remain murky, but evidence suggests that Southeast Asia serves as the epicenter of money laundering from online gaming and cyber scams, with countries like Laos, Myanmar, and Cambodia at the forefront.
Regional Warnings and Concerns
Cybersecurity expert Ngo Minh Hieu, from the Vietnamese government’s National Cyber Security Centre and independent start-ups, commented on the risks of cryptocurrencies in the region:
“The relative novelty and complexity of cryptocurrencies make them a fertile ground for scams and Ponzi schemes, targeting less informed investors.”
An Underground Banking System
Despite USDT’s questionable reputation, those managing the ecosystem of bricks-and-mortar crypto exchanges and online USDT exchanges admit to engaging in a parallel financial service within Cambodia’s developing economy:
“We are an underground bank,” one exchange owner revealed to This Week in Asia.
Potential Risks and Warnings
Amidst the chaos of Cambodia’s cryptocurrency boom, there are warnings of potential risks. Investors should exercise caution when dealing with digital assets and be aware of cyber attacks against cryptocurrency exchanges and wallets.
USDT’s Penetration into Cambodia’s Economy
It is impossible to quantify the extent of USDT’s penetration into Cambodia’s economy, but around 84 billion USDT is currently in circulation. Legitimate financial platforms are emerging, but they share the stage with underground banks and online exchanges catering to the dark economy.
Huione Pay: Online Banking and Cryptocurrency Scams
One such platform, Huione Pay, operates similarly to traditional banks but primarily conducts transactions online. Through Huione’s extensive network of interlinking Telegram channels, potential customers can find “exchange groups” offering different assets for sale. A closer analysis of these chats reveals solicitations for “pure white assets,” indicating legally-sourced funds, and offers for crucial tools for scam operators, such as mobile SIM cards and personal data.
Thriving Cybercrime in the Region
In Cambodia’s shadow economy, the relative anonymity and convenience offered by USDT have attracted crime rings operating in online gaming and cyber scams. As the perfect operating conditions for these criminal groups have been created in border areas and special economic zones of the region:
“The capacity of criminal groups running online gaming, scams, money-laundering operations, and underground banks is far more advanced than most enforcement agencies in Southeast Asia,” stated Jeremy Douglas, the United Nations Office on Drugs and Crime’s regional representative.
Sanctions Against Scam Operations and Human Trafficking
On December 8, 2022, the US, British, and Canadian governments sanctioned individuals and businesses connected to online scam operations and human trafficking in Cambodia, Laos, and Myanmar, including several Cambodian-registered businesses and Cambodian tycoon Hum Sovanny. Despite this, the use of cryptocurrency in cybercrime continues to flourish across the region.