At the peak of investigations into iCon Group's alleged fraud late last month, the Anti-Money Laundering Office checked the money trail of 247 million USDT, a cryptocurrency, worth more than 8 billion baht, suspecting the direct sales firm laundered funds through the popular stablecoin.
Investigators found a suspicious transfer of USDT after the company's executives were arrested and its assets were seized.
Cryptocurrency is often described as a convenient channel for money laundering because it is easy to change from cash to cryptocurrency, then convert it back to cash or switch to another asset by paying in crypto to launder the funds.
USDT, commonly known as Tether, is a cryptocurrency often probed for use in money laundering, especially in Asian and Southeast Asian nations. According to a report by the UN published in January this year, USDT's ease of remittance, privacy and low fees make it popular among criminals, and it is generally used for online gambling and by casinos.
Q: WHAT IS USDT?
USDT is a currency code for Tether, a fast-growing type of cryptocurrency that avoids the extreme volatility of untethered cryptocurrencies, most commonly by tying their values to the price of a traditional currency such as the US dollar, gold or other fiat money.
Launched by Tether Inc in 2014, Tether is the largest cryptocurrency in terms of trading volume, holding 70% of the market share among stablecoins. As of July 2024, Tether has more than 350 million users worldwide.
However, the stablecoin faces criticism regarding the transparency and verifiability of its claimed fiat reserves.
Stablecoin allows holders to avoid the volatility of crypto and offers the convenience of international money transfers or trading as a crypto asset.
Transferring money or making international transactions using dollars can be slow and more expensive than using stablecoin because it has to go through financial intermediaries such as banks or the Society for Worldwide Interbank Financial Telecommunication system. Therefore, entrepreneurs are increasingly turning to international money transfers via crypto.
Q: WHAT ARE THE BENEFITS USDT OFFERS?
According to crypto advocates, the major differences between international money transfers via crypto compared with the US dollar are:
- Stable value: Stablecoin is designed to have a value equivalent to the dollar (or other assets), while the dollar is influenced by governments and global markets.
- Decentralisation: Stablecoin can be transferred via a blockchain system without an intermediary organisation, making it faster and cheaper, while the dollar still needs to go through the traditional banking process.
- Usage in the digital world: Stablecoin can be used in the crypto world, such as trading digital assets or using DeFi (decentralised finance) platforms, while the greenback is used in the real-world economy.
- Traditional cryptocurrencies such as Bitcoin or Ethereum (ETH) tend to be highly volatile, while a stablecoin that is pegged to the dollar allows users to hold digital assets without worrying about sudden changes in value, making it a more reliable tool for transferring money and saving in the crypto ecosystem.
- Bridge between crypto and traditional financial systems: Stablecoins such as USDT or USDC, another crypto stablecoin pegged to the dollar and managed by Circle, serve as an important bridge between traditional financial systems and the crypto world. By having their value pegged to the dollar, users can easily transfer or convert stablecoins to cash or other digital assets. This reduces the friction and fees associated with currency conversions and international money transfers.
- Support for DeFi: Stablecoins play a key role in DeFi platforms that allow users to borrow, lend or enter into financial contracts without going through an intermediary, such as a bank. The stability of stablecoins allows users to make financial transactions without being exposed to crypto volatility in the process.
- Use as digital cash: Stablecoins can act as digital cash in everyday life. Users can use stablecoins to purchase goods and services across multiple platforms. This increases transaction efficiency and reduces reliance on banks or traditional financial systems.
"Whether a transaction is money laundering depends on the purpose of the transfer. It is not money laundering in all cases," said a source familiar with crypto transactions who requested anonymity.
The verification and tracking of USDT transactions can be done transparently through blockchain technology using a tool called a blockchain explorer, such as Etherscan or Tronscan, to view information about transactions, such as wallet addresses that send and receive USDT, said the source.
Q: HOW DOES MONEY LAUNDERING WORK USING USDT?
First, the money to be laundered is placed into a layering system, then fake transactions are made via transfers back and forth, making it difficult to track, followed by mixing grey money with clean money.
The final step is integration, which means converting the money into other assets, mostly luxury products such as branded bags, luxury cars or land, said the source.
The USDT needs to be converted to other assets because even though USDT is a popular digital currency, it still has limitations maintaining its value in the long term because it does not have a mechanism to resist inflation.
"Converting USDT into valuable assets is one way to maintain the value of capital in the long term," said the source.
Q: HOW CAN THE MONEY TRAIL BE TRACKED FOR USDT?
To track USDT transfers, people need the knowledge and skills to investigate and ownership of a digital wallet, said the source.
"Even if you know where the destination is, you cannot know who owns the destination. This is called pseudo-anonymity or semi-anonymity," said the source.
For wallets that cannot be identified, there is a solution for digital asset exchanges regulated by the Securities and Exchange Commission (SEC). The know-your-customer process requires exchanges to verify the identity of users.
For the public to understand and use digital currencies such as USDT effectively, they should have knowledge of the transaction process from start to finish, including how to verify the accuracy of the transaction, noted the source.
For officials, the large amount of data in the blockchain network means data analysis requires modern tools and technologies, such as big data analysis and efficient processing systems, to effectively check and track suspicious transactions.
Att Tongyai Asavanund, president of the Thai Digital Asset Operators Trade Association (TDO), agreed the reason criminals often use cryptocurrency for money laundering is because the asset can quickly and easily be moved across borders at low cost.
However, money laundering via cryptocurrencies is quite limited, accounting for only 1% of total money laundering worldwide, he said. Cash is still the most commonly used form of money laundering, said Mr Att.
The reason USDT is popular for digital asset transactions is because it is a stablecoin used for many international money transfers and it is utilised as a benchmark for crypto trading, he said.
The TDO acknowledged some of its popularity may be related to money laundering.
At the end of last month, the SEC sent a letter to digital asset exchanges under its supervision requesting their cooperation in submitting reports of suspicious customer behaviour, which could involve money laundering through the exchanges.
According to coinmarketcap, USDT is the third most-popular coin traded worldwide after Bitcoin and ETH, representing more than 20% of the overall crypto market. As of Nov 5, global crypto market capitalisation was $2.23 trillion.
