Alessandro Arduino

Opinion | Stablecoins in Southeast Asia: the less volatile cryptocurrency is a boon for terrorist groups

Despite the appeal of anonymity and ease of international fund transfers, large swings in value have made cryptocurrency unattractive to extremist and criminal networks

But stablecoins, which have a value fixed against a certain asset, offer these groups an advantage – as does the widespread adoption of digital payments in Southeast Asia

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Visual representations of various cryptocurrencies on display in Paris, France. Photo: Getty Images

Alessandro Arduino

Published: 8:15pm, 18 Jan 2021Updated: 8:19pm, 18 Jan 2021

Cryptocurrencies have become a convenient medium for the movement of funds due to the high degree of anonymity offered by blockchain-diffused ledgers, and the operational ease of fund transfers across continents – both of which have been exploited by terrorist and criminal networks, and even states such as North Korea.

Now, another form of cryptocurrencies – stablecoins – are making such illicit uses more viable, and raising regulators’ eyebrows.

In the past, the broad use of cryptocurrencies as a speculative tool resulted in volatility, making them unattractive to extremist organisations. The thinking went that such groups could not afford sudden swings in value, as this could affect planned operations or delay payments to fighters. The bitcoin trend over the past few weeks is a case in point.

In the space of a few days, the value of Bitcoins went on a roller-coaster ride, surging from US$20,000 to settle at close to US$40,000 last week, leaving investors who cashed in early muttering under their breath and regulators screaming for action.

Stablecoins, the value of which is fixed against a certain asset, are changing the rules of the game –they offer criminal and terrorist organisations all the advantages of cryptocurrency without the downside of volatility. Tether, which is designed to keep the value of each token pegged to US$1 and is issued by the eponymous Hong Kong-based company, is leading the pack.

Widespread Asian adoption of cryptocurrencies make the region a natural choice for shady outfits. Photo: Shutterstock

Tether recently outpaced Bitcoin to become the world’s most-used cryptocurrency, and owes its rapid adoption to its advertised stability as well as its ease of use in cross-border transactions. This trend is also spreading to other cryptocurrencies: in late December, the New York State Department of Financial Services authorised Japanese internet giant GMO to issue, administer, and redeem Japanese yen and US dollar-pegged stablecoins in New York. There is little doubt that extremist organisations are taking note of these developments.