The government of Laos has authorized six companies to trial mining and trading cryptocurrencies, the Laotian Times reported yesterday, despite its stated concerns that such currencies could be used to facilitate illegal activity.
According to a report in the Laotian Times, the trial will proceed while a host of ministries work with the Bank of Laos and the state power supply company Electricite du Laos (presumably because of the immense power required to mine cryptocurrencies) to research and decide upon regulations governing the use of these pseudo-currencies in Laos. The findings of the research and consultation between ministries and relevant organizations will then be discussed at a meeting this week.
With prices based on nothing beyond speculation on their future value, cryptocurrencies like Bitcoin, Ethereum, and Litecoin are known for being highly volatile. It is therefore hard to see how opening Laos’ $18 billion to the borderless and inflammable crypto markets will bring any benefit to the country’s population, especially given the host of other pressing problems facing the country.
The anonymity of cryptocurrencies – mooted as a major advantage by their boosters – have also unsurprisingly led them to be associated with all manner of criminal activity, from online scams to drug trafficking operations. This suggests that at best, Bitcoin and its counterparts have been vastly oversold. At worst, they are an environmental hazard and a giant fraud.
For these reasons, the Chinese government has recently launched a fierce crackdown on the technology, on the reasonable grounds that its lurching price fluctuations posed a threat to the nation’s financial stability. It has banned crypto mining operations and ordering major banks not to do business with crypto companies. In June, the State Council’s Financial Stability and Development Committee stated that it would “resolutely prevent the transmission of individual risks to the wider society.”
The government of Laos seems to understand these risks. Last month, it issued a notice warning the public about the use of unregulated cryptocurrencies, observing that they are “subject to extreme fluctuation and may be used as payment for illegal operations.”
According to a report in the Laotian Times, “Authorities have warned Lao nationals against engaging in or trading in cryptocurrencies, citing the significant risks connected with them, such as their potential use in money laundering or the funding of terrorism.” This makes it all the more surprising that the Lao government would consider licensing crypto technologies, something that will do nothing but worsen the country’s crime problem.
Even if the government creates stringent crypto regulations, it has a weak capacity to actually enforce them. It is this weak capacity that has transformed Laos (and Cambodia) into attractive offshore bases for foreign businesspeople – many of them from mainland China – who are engaged in illicit and criminal activities of various kinds.
In particular, Chinese organized crime syndicates have become deeply enmeshed with the various illicit trades – everything from gambling and smuggling to wildlife and narcotics trafficking – that flourish along the porous and loosely policed borderlands stretching across eastern Myanmar, southern China, and the northern reaches of Thailand and Laos.
Laos has is also becoming an increasingly important node in the networks of international drug trafficking syndicates that reap tens of billions of dollars per year from the sale of narcotics – mostly methamphetamine – produced in rebel- and militia-held regions of Myanmar’s Shan State, with which Laos shares a porous and loosely policed border.
A case in point is the Golden Triangle Special Economic Zone (GTSEZ), a sprawling tourism and gambling settlement in northwest Laos that has attracted considerable attention for its alleged immersion in a range of criminal enterprises. In January 2018, the U.S. Treasury Department imposed sanctions on its chief Zhao Wei and three associates for engaging in “drug trafficking, human trafficking, money laundering, bribery and wildlife trafficking, much of which is facilitated through the Kings Romans Casino,” the centerpiece development of the GTSEZ.
If the Lao government authorizes crypto mining and trading, it is a decent bet that Laos would become an overnight center for Chinese crypto operations displaced by Beijing’s government’s recent crackdown. Similarly, it is hard to see these operations benefiting anyone but those who are wealthy, well-connected, and engaged in businesses that would benefit from the crossborder mobility and anonymity that cryptocurrencies provide.
The government’s trial may be an attempt to establish some form of control over crypto before it gets out of hand; hence their warnings to the public about it. But creating regulations is one thing; implementing them is another. While Laos’ controversial slew of hydropower dams would no doubt power a flourishing crypto mining economy, there is little good – and considerable bad – that can come to the country from opening its arms to uncertain technology.
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