Southeast Asia On-Chain Fund Flows and Risk Analysis Report
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Southeast Asia On-Chain Fund Flows and Risk Analysis Report
This report not only reveals the risks associated with cryptocurrency usage in Southeast Asia, but also explores the underlying causes of this phenomenon from a macro perspective, and puts forward relevant recommendations.
Navigating Web3 tides with focused insightsAuthor: Beosin
As cryptocurrencies gain global popularity and the number of crypto users rapidly grows across Southeast Asia, on-chain fund flows in the region have become increasingly frequent and complex. To better understand the characteristics of these fund flows, potential financial risks, and their connections with illicit industries, Beosin conducted an in-depth analysis based on a sample of 10,000 blockchain addresses (such as individual wallets and exchange users from Southeast Asia) collected since 2020. By tracking and labeling various types of risky fund flow paths, we found that the level of risk involved in cryptocurrency circulation patterns exceeds expectations. This report not only reveals the risks associated with cryptocurrency usage in Southeast Asia but also explores the underlying macro-level causes and offers relevant recommendations.
Overview of the Southeast Asian Cryptocurrency Market
In recent years, acceptance and adoption of cryptocurrencies have significantly increased across Southeast Asia.
As an emerging market, Southeast Asia exhibits unique characteristics in terms of economic structure, policy environment, and user behavior, particularly in the following aspects:
1. Rapid user growth: With a large proportion of young people and widespread mobile internet access, the number of cryptocurrency users in Southeast Asia is growing rapidly. It is estimated that tens of millions of individuals in the region are already using cryptocurrencies.
2. Strong demand for cross-border payments: The region has a large population of migrant workers who rely on efficient cross-border remittance methods. Cryptocurrencies offer a convenient solution and are thus widely adopted.
3. Inconsistent regulatory environments: Regulatory policies toward virtual assets vary significantly among Southeast Asian countries. While some support cryptocurrency legalization, most jurisdictions lack clear regulatory frameworks, creating compliance risks for capital flows.
Sample Analysis and Key Findings
Chart: Fund Flow Diagram
Chart: Distribution of Addresses Receiving Funds into Web3 Wallets
1. Free Fund Circulation
Among the 10,000 blockchain addresses analyzed, approximately 45.23% of funds circulated freely on public blockchains via decentralized wallets, demonstrating high liquidity and decentralization. The total volume of freely circulating funds reached $1.484 billion, indicating that peer-to-peer decentralized transactions have become mainstream among Southeast Asian users.
2. Links to Illicit Industries
In this dataset, over $110 million—more than 12%—was directly transferred to addresses linked to illicit (gray or black market) activities. Further tracing of remaining addresses revealed indirect links through secondary or multiple transactions, increasing the proportion of addresses at risk of association with illicit industries to 16.82%. This suggests that among tens of millions of crypto users in Southeast Asia, potentially millions may be indirectly or directly exposed to financial ties with illegal operations.
Chart: Association with Black and Gray Markets
Fund Flows and Risk Analysis Related to Illicit Industries
1. Categorization of Illicit Industry Addresses
Beosin classified addresses closely associated with illicit industries into 3 major categories and 44 subcategories using risk tags. High-risk categories include:
● Mixing services: Used primarily to anonymize fund flows
● Underground banks: Facilitate illegal cross-border fund transfers and money laundering
● Fraud platforms: Involve fake investments, Ponzi schemes, "pig-butchering" scams, and similar frauds
These high-risk address types involve more than 240 specific illicit entities.
2. High-Risk Fund Flow Patterns
The study identified particularly notable fund movement patterns:
● Over $10 million flowed directly into underground bank-related addresses, with transaction frequency accumulating to thousands.
● Approximately $11 million was clearly directed toward online gambling platforms.
● More than $22 million was channeled into fraud platforms.
These fund flows highlight the complexity and concealment of illicit industry operations. Especially under the anonymity and cross-border nature of cryptocurrencies, criminals can frequently conduct illegal fund transfers and money laundering.
Chart: Funds Flowing into Black Markets
Fund Inflows to Sanctioned Platforms
1. Proportion of Funds Flowing to Sanctioned Platforms
Among funds directly linked to illicit industries, about 53.49% were sent to sanctioned platforms. The number of related transactions was even twice that of flows to underground banks, with a total value exceeding $55 million. This indicates that sanctioned platforms remain primary destinations for high-risk funds.
2. Case Study: 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 inflows to sanctioned platforms. However, since the U.S. Department of Treasury added Tornado Cash to its sanctions list in August 2022, its transaction volume has notably declined, showing that sanctions have effectively curbed its fund inflows.
Chart: Trend and Share of Funds Flowing into Tornado Cash
Macro-Level Risk Analysis and Root Causes
1. Cryptocurrency Anonymity and High Liquidity: The anonymity of cryptocurrencies makes it difficult to trace illicit funds on-chain. Even when risk addresses can be technically flagged, funds can still obscure their origins through techniques like coin mixing, facilitating money laundering.
2. Lack of Regulatory Frameworks in Southeast Asia: Cryptocurrency regulations across Southeast Asian nations remain underdeveloped, increasing risks associated with cross-border capital flows. Some regions maintain a wait-and-see approach without proactive oversight, providing space for illicit financial activities.
3. Socioeconomic Conditions: In certain Southeast Asian countries, low economic development levels and significant wealth gaps create fertile ground for scammers and online gambling operators, many of whom target foreign victims.
4. Technical Challenges in Regulation: Due to technological and architectural limitations, cryptocurrency exchanges, wallet providers, and decentralized platforms often struggle to effectively monitor or investigate transaction risks. Decentralized platforms especially lack direct control over transaction data, making it hard to promptly detect malicious behavior or money laundering. Although some centralized platforms attempt to strengthen monitoring through KYC and AML measures, cross-chain transactions and anonymizing technologies continue to complicate fund flow tracking and increase security vulnerabilities.
Conclusion and Recommendations
The analysis of on-chain fund flows in Southeast Asia reveals substantial security risks within the region's cryptocurrency ecosystem. To effectively reduce the risk of illegal on-chain fund movements, Beosin recommends the following actions:
1. Strengthen Regulatory Mechanisms: Governments should establish comprehensive cryptocurrency regulations and engage in cross-border cooperation to combat illicit on-chain activities. Clear and tailored virtual asset regulatory frameworks should be developed according to national contexts.
2. Enhance User Risk Awareness: Increase anti-fraud education for the general public to help users recognize on-chain risks, improve identification of illicit financial flows, and strengthen preventive awareness.
3. Promote Technological Innovation: Actively develop and deploy on-chain tracking and anti-money laundering technologies, leveraging big data analytics and artificial intelligence to accurately detect and disrupt high-risk fund flows.
4. Establish Multi-Party Collaboration Mechanisms: Encourage collaboration among cryptocurrency exchanges, wallet service providers, and other institutions in Southeast Asia to enhance information sharing and joint risk prevention, thereby improving overall on-chain security.
As one of the most promising regions for cryptocurrency development, Southeast Asia will continue to face challenges related to fund flow risks. Beosin remains committed to investing resources and technology, collaborating with stakeholders to build a secure, transparent, and compliant cryptocurrency ecosystem. Through strengthened regulation, improved user awareness, and innovative technical solutions, we aim to progressively reduce illegal on-chain fund flows and support the healthy development of Southeast Asia’s digital economy.
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