Southeast Asia Crypto Assets Market Risk Analysis Report

In recent years, Crypto Assets have rapidly gained popularity worldwide, with the number of crypto users in Southeast Asia also showing explosive growth. To gain a deeper understanding of the on-chain capital flow characteristics, potential financial risks, and their association with illegal activities in this region, this report conducts an in-depth analysis based on a sample of 10,000 blockchain addresses from 2020 to the present. The research findings reveal that the risks associated with the use of Crypto Assets in Southeast Asia far exceed expectations, and the report explores the causes of this phenomenon from a macro perspective while also providing relevant recommendations.

Southeast Asia Crypto Assets Market Overview

Southeast Asia, as an emerging market, exhibits unique characteristics in terms of economic structure, policy environment, and user behavior:

1. Rapid user growth: The region has a high proportion of young people, coupled with the widespread adoption of mobile internet, which has led to a rapid increase 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 have made Crypto Assets a convenient tool for cross-border payments, widely used.

3. Regulatory environment varies: The regulatory policies for virtual currencies differ significantly among countries, and most regions have not yet established a clear regulatory framework, leading to compliance risks in the flow of funds.

Sample Analysis and Key Findings

1. Free flow of funds

Analysis shows that approximately 45.23% of the funds circulate freely on the public chain through decentralized wallets, totaling 1.484 billion USD, reflecting high liquidity and decentralized characteristics.

2. Association with illegal activities

More than $110 million in funds has flowed directly to addresses related to illegal activities, accounting for over 12%. Further tracking revealed that through multiple transactions, some addresses have indirect links to illegal activities, raising the proportion of related risk addresses to 16.82%. This means that millions of Southeast Asian Crypto Assets users may be at risk of having financial transactions directly or indirectly related to illegal activities.

High-Risk Fund Flow and Analysis

1. High-risk address type

The research classifies addresses closely related to illegal activities into 3 major categories and 44 subcategories, mainly including:

• Mixing service: Used for anonymizing the flow of funds
• Underground money house: used for cross-border illegal fund dispatch and money laundering
• Fraudulent platforms: Involving false investments, Ponzi schemes, etc.

These high-risk address types involve over 240 specific illegal activity entities.

2. High-risk capital flow phenomenon

• Over 10 million USD in funds directly flowed into underground money laundering addresses, with transaction frequencies reaching thousands.
• Approximately 11 million USD flowed into online gambling platforms.
• Over 22 million dollars in funds have been funneled into fraudulent platforms.

These funding flows reveal the complexity and concealment of illegal activities, and the anonymity and cross-border characteristics of Crypto Assets provide convenience for criminals.

Capital inflow situation of sanctioned platforms

1. Proportion of funds flowing into sanctioned platforms

Approximately 53.49% of funds directly associated with illegal activities flowed to sanctioned platforms, with the number of related transactions being twice that of those flowing to underground money houses, totaling over 55 million USD.

2. Case Study: A Mixing Coin Tool

As a commonly used mixing tool, a certain platform received over $54 million in funding during this study, accounting for 97.84% of the total capital inflows to all sanctioned platforms. However, since being listed as a sanctioned entity in August 2022, its trading volume has significantly declined, indicating that sanctions have a suppressive effect on capital inflows.

Macroeconomic Risk Analysis and Causes Discussion

1. Crypto Assets anonymity and high liquidity: Increases the difficulty of tracking illegal funds.

2. Lack of regulatory framework: The regulatory measures in Southeast Asian countries are inadequate, increasing the risk of cross-border capital flows.

3. Socio-Economic Environment: Some countries have a low level of economic development and a large gap between the rich and the poor, which becomes a breeding ground for illegal activities.

4. Difficulty of Technical Supervision: Crypto Assets exchanges, wallet service providers, and decentralized platforms face challenges in effectively monitoring transaction risks from a technical and architectural standpoint.

Conclusion and Recommendations

To reduce the risk of illegal fund flows on the chain, 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 users' risk identification capabilities: Strengthen anti-fraud education efforts and increase users' awareness of prevention.

3. Promote technological innovation: Develop on-chain tracking and anti-money laundering technologies to accurately identify high-risk capital flows.

4. Establish a multi-party collaboration mechanism: Encourage relevant institutions to work together, strengthen information sharing and risk joint prevention.

Southeast Asia, as a region with great potential for the development of Crypto Assets, still faces challenges from the risks of capital flow in the future. By strengthening regulation, raising user awareness of security, and promoting technological innovation, we hope to gradually reduce illegal capital flows on the chain and promote the healthy development of the digital economy in Southeast Asia.