Southeast Asia Crypto Assets Fund Flow: Risks and Opportunities Coexist

In recent years, the use of Crypto Assets in the Southeast Asian region has shown explosive growth, but it has also brought a series of potential risks. To gain a deeper understanding of the on-chain capital flow characteristics and related risks in the region, a research analysis based on a sample of 10,000 blockchain addresses revealed some concerning trends.

Southeast Asia Crypto Assets Market Overview

Southeast Asia, as an emerging market, exhibits unique characteristics in the Crypto Assets field:

1. Rapid user growth: The high proportion of young population and the widespread use of mobile internet have driven a surge in Crypto Assets users, estimated to have reached tens of millions.

2. Strong demand for cross-border payments: A large number of cross-border workers use Crypto Assets as a convenient cross-border payment tool.

3. Varying regulatory environments: There are significant policy differences among countries, and most regions have not established clear regulatory frameworks, increasing compliance risks.

Fund Flow Analysis

Research shows that approximately 45.23% of funds circulate freely on the public chain through decentralized wallets, totaling $1.484 billion, reflecting that decentralized trading has become mainstream. However, over $110 million of funds have directly flowed to addresses related to the black and gray industries, accounting for over 12%. Further tracking revealed that the proportion of addresses indirectly associated with the black and gray industries rose to 16.82%, indicating that millions of cryptocurrency users in Southeast Asia may have financial transaction risks related to the black and gray industries.

Flow of Funds in the Black and Gray Industries

The research categorizes addresses related to the black and gray industries into 3 major categories and 44 subcategories, involving more than 240 specific entities. The main high-risk categories include:

• Mixing Service: Used for the anonymization of fund flows
• Underground banks: used for cross-border illegal fund dispatch and money laundering
• Fraudulent platforms: including false investments, Ponzi schemes, etc.

It is worth noting that:

• Over $10 million in funds flowed directly into underground money houses, with thousands of transactions.
• Approximately $11 million flowed to online gambling platforms.
• More than 22 million USD was funneled into the scam platform.

Funding Inflow Situation of Sanctioned Platforms

Among the funds directly related to the black and gray industries, 53.49% flowed to sanctioned platforms, with a total value exceeding $55 million. Among them, Tornado Cash, as a commonly used coin mixing tool, received over $54 million, accounting for 97.84% of the funds flowing into sanctioned platforms. However, since being sanctioned by the U.S. Department of the Treasury in August 2022, its trading volume has significantly decreased.

Risk Cause Analysis

1. The anonymity and high liquidity of Crypto Assets facilitate the flow of illegal funds.
2. The regulatory system for Crypto Assets in the Southeast Asia region is incomplete, increasing the risk of cross-border capital flow.
3. Some countries have a lower level of economic development, making them targets for criminals.
4. The difficulty of technical regulation is high, especially for decentralized platforms where it is challenging to effectively monitor transaction data.

Suggestions and Outlook

To reduce the risk of illegal fund flows on the blockchain, it is recommended to take the following measures:

1. Strengthen regulatory mechanisms: Develop comprehensive Crypto Assets regulatory policies and enhance cross-border cooperation.
2. Enhance user risk identification capabilities: Increase efforts in anti-fraud education.
3. Promote technological innovation: Develop on-chain tracking and anti-money laundering technologies.
4. Establish a multi-party collaboration mechanism: Encourage relevant institutions to work together, strengthen information sharing and joint risk prevention.

Southeast Asia, as a region with great potential for the development of Crypto Assets, still faces challenges related to the risk of capital flow. By strengthening regulation, enhancing user awareness of security, and promoting technological innovation, it is expected to gradually reduce illegal capital flows on the chain and promote the healthy development of the digital economy in the region.