Original Beosin Beosin December 16, 2024 10:12 SingaporeWith the global proliferation of cryptocurrencies and the rapid growth of cryptocurrency users in Southeast Asia, the on-chain fund flows in this region have become increasingly frequent and complex. To gain a deeper understanding of the flow characteristics of on-chain funds in Southeast Asia, potential financial risks, and connections with illegal industries, Beosin conducted this in-depth analysis based on a sample of 10,000 blockchain addresses extracted from 2020 to the present (such as Southeast Asian personal wallets/Southeast Asian exchange users, etc.). By tracking and marking different types of risk fund flow paths, we found that the risk levels involved in the circulation patterns of crypto assets exceed expectations. This report not only reveals the risks of cryptocurrency usage in Southeast Asia but also explores the underlying reasons for this phenomenon from a macro perspective and offers relevant recommendations.

Overview of the Southeast Asian Cryptocurrency Market


In recent years, the acceptance and popularity of cryptocurrencies in Southeast Asia have significantly increased.
As an emerging market, Southeast Asia has unique characteristics in terms of economic structure, policy environment, and user behavior, particularly evident in the following aspects:
1. Rapid User Growth: The proportion of young people in Southeast Asia is relatively high, coupled with the widespread use of mobile internet, leading to a rapid increase in the number of cryptocurrency users in the region. It is estimated that there are already tens of millions of cryptocurrency users in this region.
2. Strong Demand for Cross-Border Payments: The large number of cross-border workers in Southeast Asia makes cryptocurrencies a convenient means of cross-border payment, leading to widespread application.
3. Uneven Regulatory Environment: The regulatory policies for virtual currencies vary significantly across Southeast Asian countries. Some countries support the legalization of cryptocurrencies, but most regions have not yet formed a clear regulatory framework, resulting in certain compliance risks in fund flows.
Sample Analysis and Key Findings
Chart: Fund Flow SchematicChart: Distribution of Addresses Flowing to Web3 Wallets 1. Free Flow of Funds
Among the 10,000 blockchain addresses analyzed, approximately 45.23% of the funds flow freely on the public chain through decentralized wallets, demonstrating high liquidity and decentralized characteristics. The total amount of freely flowing funds reaches $1.484 billion, indicating that decentralized trading methods have become mainstream among users in Southeast Asia.
2. Associations with the Black and Gray Industries
Among these addresses, over $110 million in funds directly flowed to addresses related to black and gray industries, accounting for over 12%. Further tracking of the remaining addresses' fund flows revealed that through secondary or multiple transactions, some addresses also developed indirect connections with the black and gray industries, raising the proportion of at-risk addresses associated with these industries to 16.82%. This means that among tens of millions of cryptocurrency users in Southeast Asia, there could be millions of users with indirect or direct financial transaction risks with black and gray industries.
Chart: Association with the Black Market - Fund Flow and Risk Analysis of Black and Gray Industry
1. Categorization of Black and Gray Industry Addresses Beosin classifies addresses closely related to black and gray industries into three major categories and 44 subcategories through risk labels. The high-risk categories mainly include: ● Mixing Services: Primarily used for anonymizing fund flows ● Underground Banks: Used for cross-border illegal fund scheduling and money laundering ● Fraud Platforms: Involving false investments, Ponzi schemes, and various scams. Among these high-risk address types, over 240 specific entities related to the black and gray industries are involved.
2. Study of High-Risk Fund Flow Phenomena Results indicate that certain specific categories of fund flows are particularly significant: ● Over $10 million in funds directly flowed into addresses related to underground banks, with transaction frequencies accumulating to thousands. ● Approximately $11 million in funds clearly flowed to online gambling platforms. ● Over $22 million in funds were directed into fraud platforms.
Such fund flows reveal the complexity and concealment of black and gray industry activities, especially under the anonymity and cross-border characteristics of cryptocurrencies, allowing wrongdoers to frequently conduct illegal fund transfers and money laundering activities.
Chart: Fund Inflows to Sanctioned Platforms from the Black Market
1. Proportion of Fund Inflows to Sanctioned Platforms
Among the funds directly associated with the black and gray industries, approximately 53.49% flowed to sanctioned platforms, with the number of related transactions even doubling that of the flows to underground banks, totaling over $55 million. This indicates that sanctioned platforms remain the primary inflow of high-risk funds.
2. Case Analysis: Tornado Cash
As a commonly used mixing tool, Tornado Cash received over $54 million in funds during this study, accounting for 97.84% of all fund inflows to sanctioned platforms. However, since the U.S. Treasury placed Tornado Cash on the sanctions list in August 2022, its transaction volume has significantly decreased, demonstrating the effective suppression of its fund inflows due to sanctions.
Chart: Trends and Proportions of Funds Flowing to Tornado Cash - Macro Risk Analysis and Cause Exploration
1. Anonymity and High Liquidity of Cryptocurrencies: The anonymity of cryptocurrencies makes it difficult to track illegal funds when they flow on-chain. Even if technical means mark risk addresses, funds can still obscure their flow through mixing and other technical means, facilitating money laundering activities.
2. Lack of Regulatory Framework in Southeast Asia: The regulatory measures for cryptocurrencies are still inadequate in Southeast Asian countries, leading to increased risks of cross-border fund flows. Some regions remain cautious about cryptocurrencies and have not adopted proactive regulatory measures, providing space for the flow of black and gray industry funds.
3. Socioeconomic Environment: Some Southeast Asian countries have lower economic development levels and significant wealth gaps, leading many scammers and online gambling operations to establish bases here, primarily attracting foreign participants.
4. Technical Difficulties in Regulation: Cryptocurrency exchanges, wallet service providers, and decentralized platforms often struggle to effectively monitor and investigate the risks behind transactions due to limitations in technology and architecture. Decentralized platforms particularly lack direct control over transaction data, making it difficult to timely identify malicious activities or money laundering risks. Although some centralized platforms attempt to strengthen monitoring through KYC and AML measures, cross-chain transactions and anonymity technologies still complicate fund flow tracking, increasing security risks.
Conclusion and Recommendations
Analysis of on-chain fund flows in Southeast Asia shows that there are significant security risks associated with cryptocurrency usage in the region. To effectively reduce the risks of illegal fund flows on-chain, Beosin recommends the following measures:
1. Strengthening Regulatory Mechanisms: Governments should develop and implement comprehensive cryptocurrency regulatory policies, combating illegal on-chain fund activities through multinational cooperation and establishing clear virtual currency regulatory frameworks tailored to different national conditions.
2. Enhancing User Risk Identification Capabilities: Increasing anti-fraud education efforts for ordinary users to help them understand on-chain risks, enhancing their ability to identify and prevent funds associated with black and gray industries.
3. Promoting Technological Innovation: Actively developing and applying on-chain tracking and anti-money laundering technologies, using big data analysis and artificial intelligence to accurately identify and combat high-risk fund flows.
4. Establishing Multi-Party Collaboration Mechanisms: Encouraging cryptocurrency exchanges, wallet service providers, and related institutions in Southeast Asia to collaborate, strengthen information sharing, and risk prevention, thereby improving on-chain security.
As one of the most promising regions for cryptocurrency development, Southeast Asia still faces challenges related to fund flow risks. Beosin will continue to invest resources and technology to collaborate with various sectors, striving to build a secure, transparent, and compliant cryptocurrency ecosystem. By strengthening regulations, improving user awareness of security, and promoting technological innovation, we hope to gradually reduce illegal fund flows on-chain and promote the healthy development of the digital economy in Southeast Asia.
We have provided a detailed analysis, welcome to visit our official website to view and download:
Download link: https://www.beosin.com/resources/Southeast_Asia_On-Chain_Capital_Flow_and_Risk_Analysis_Report.pdf