In Cambodia, Tether coin becomes crypto of choice for Chinese-linked activities

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"The relative newness and complexity of cryptocurrencies makes them fertile ground for scams and Ponzi schemes, targeting less informed investors," said cybersecurity expert Ngo Minh Hieu, who works for the Vietnamese government's National Cyber ​​Security Center and other independent startups.

Supporters of Tether Holdings claim that the cryptocurrency it issues is pegged to US Treasury bills, although critics have questioned whether it actually has enough assets to back everything it mint.

Even those who run the ecosystem of traditional Phnom Penh crypto exchanges and online USDT exchanges admit that they are running a parallel financial service in the developing economy.

"We are an underground bank," one exchange owner told This Week in Asia, responding in Chinese. "The questions you ask may be related to customer privacy, so please understand that we cannot speak to you."

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But even at the beginning of the sales, there are warnings about the rise of cryptocurrencies in Cambodia.

"A lot of people lose money on their phone, you have to be careful," said one staff member.

Expert Ngo Minh Hieu says there is no absolute security in the hustle and bustle of the cryptocurrency world.

“Hacking of cryptocurrency exchanges and wallets is also a major risk,” he said.

SIM cards, personal data

It is impossible to know the magnitude of Tether's reach in Cambodia's economy. But globally, there are around 84 billion USDT in circulation.

Banks, exchanges and platforms are flourishing and their promises of seamless and reliable digital solutions to money flow problems are easily advertised through social media and encrypted channels.

A financial platform registered in Cambodia, Huione Pay, has a branch that looks like any other bank, except tellers discuss USDT exchange options with customers. But its main activities take place online.

Huione hosts a network of interconnected Telegram channels, with dozens of “exchange groups” offering different assets for sale.

Huione's analysis of publicly available USDT exchange activities provides a window into how Tether enables transactions in Cambodia.

Some Chinese chats ask for “pure white assets,” which indicates money from a legitimate source, while others do not ask for such a source.

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Although it's difficult to confirm from such vague advertisements, both services on offer are crucial tools for scam operators, who hand out dozens of SIM cards to workers so they can disguise identities and provide contact information to potential brands.

Other conversations appear to be in code: discussions about “autos” seem to refer to bank cards that can be used to receive money from fraud victims, while the letter “u” indicates USDT, the currency accepted in most deposits and transactions in the dark trade.

One of the cryptocurrency trading groups announced by Huione offers online investigation services covering criminal background checks, company records and bank statements, and at one point the advertisement addresses a potential customer base: "[We] Welcome to the scam complex to come and request information.”

Bank officials did not respond to This Week in Asia's repeated requests for more details about its activities.

Tether's broader appeal to Southeast Asian criminal groups is beyond doubt, security experts say.

"In a sense, the perfect operating conditions have been created for criminals in the border areas and special economic zones of the region," said Jeremey Douglas, regional representative of the United Nations Office on Drugs and Crime. He explained that cryptocurrencies – particularly USDT traded on the TRON exchange platform – were widely used by cybercriminals and governments in the region could not keep up.

"The capabilities of criminal groups running online gaming, scams, money laundering operations and underground banking are far more advanced than most law enforcement agencies in Southeast Asia," Douglas added.

The list includes Cambodian-registered companies ZhengHeng Group Co Ltd, Heng He Casino, KB Hotel, Pacific Real Estate Management Co and Golden Sun Sky Co Ltd; Cambodian tycoon Hum Sovanny; as well as She Zhijiang and Dong Lecheng, both Chinese citizens who have been naturalized through Cambodia's passport-to-purchase program.

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The dark world of Asia's online casino industry

The dark world of Asia's online casino industry

Beyond reach

The National Bank of Cambodia has adopted blockchain, the digital ledger technology enabled by cryptocurrency, to enable QR payments and transfers between registered banks.

But cryptocurrencies have been banned in the country since 2017.

Meas Soksensan, spokesman for Cambodia's Ministry of Economy and Finance, said he had not been informed about the US-led Tether investigation and the National Bank of Cambodia could not be reached for comment.

Cryptocurrencies proliferate in Cambodia's many casinos, in brick-and-mortar emporiums catering primarily to Chinese or the Chinese diaspora, to customers evading gambling bans in their countries, as well as an untold number of online gambling sites that They operate from the Southeast Asian nation.

In a September report on casinos and cyber fraud in Southeast Asia, the United Nations Office on Drugs and Crime reported that cryptocurrencies appear to be increasingly used in illicit financial flows, and estimated that between 7.5 and 12.5 billion dollars in illegal money move through them. a Southeast Asian country he did not name.

Cambodia banned its booming online gambling business in 2020, but the sites are still available.

Ben Lee, managing partner at regional gaming consultancy IGamiX Management and Consulting, said cryptocurrencies are embedded in the casino industry due to the simplicity of cross-border transfers.

"I think most governments in Asia... are not prepared for this development," he said, adding that casinos care more about revenue than the nature of the money passing through their establishments.

Tether appears to be the cryptocurrency of choice for online gambling companies serving Chinese markets, said Jonny Ferrari, a colorful American businessman who has worked in Cambodia's casino industry since 2015, explaining that it allows criminals rinse your money through multiple shell companies.

"No one has the ability to trace it that far back," he said.