The Growing Risks of Crypto Scams in Emerging Markets: Implications for Global Investors

The rapid adoption of cryptocurrency in emerging markets has unlocked new opportunities for financial inclusion and economic growth. However, this progress is shadowed by a surge in scams and fraud, driven by weak regulatory frameworks and the anonymity of digital assets. For global investors, the stakes are high: while these markets offer untapped potential, they also present systemic risks that demand a nuanced understanding of fraud resilience and regulatory dynamics.

The Scam Surge: A Global Crisis with Local Roots

In 2023, global crypto scams resulted in over $5.6 billion in losses, a 45% increase from the prior year, according to the FBI's 2023 Cryptocurrency Fraud Report. Emerging markets, including India, Nigeria, Vietnam, and the Philippines, have become hotspots for fraudulent activity. These regions, characterized by high crypto adoption and limited regulatory oversight, are particularly vulnerable to schemes like "pig butchering" scams, where scammers exploit trust to siphon funds through fake platforms. By 2025, global losses from crypto scams had reached $1.5 billion in the first three quarters alone, with 18,518 reported cases.

The Philippines, for instance, faced a crisis in 2025, with 13.4% of digital transactions flagged as potentially fraudulent-second only to India globally. Over 74% of Filipinos were targeted by scammers in the past three months, resulting in $8.29 billion in annual losses. Similarly, Vietnam saw the proliferation of unregulated platforms like Paynet Coin, which operated a $2 billion Ponzi scheme before being dismantled by authorities. These cases underscore how the decentralized nature of crypto, while empowering users, also creates fertile ground for exploitation.

Regulatory Progress and Persistent Gaps

Emerging markets have made strides in addressing these risks. Argentina, for example, mandated Virtual Asset Service Provider (VASP) registration under the Commission Nacional de Valores (CNV) in 2024, aligning with international anti-money laundering standards. The Philippines introduced a comprehensive oversight framework for crypto asset service providers (CASP) in 2025, reflecting a broader trend toward institutional adoption. Nigeria, a pioneer in regulatory innovation, continued refining its crypto framework to combat fraud and money laundering.

Yet, regulatory gaps persist. Vietnam's restrictions on crypto trading have not curbed grassroots adoption, with users turning to decentralized platforms despite risks. Meanwhile, the migration of scam hubs to borderlands like Laos and Myanmar highlights the challenges of cross-jurisdictional enforcement. Even in countries with robust frameworks, such as the EU's Markets in Crypto-Assets (MiCA) Regulation, implementation has been uneven, with divergent interpretations among member states.

Investor Responses: Balancing Caution and Opportunity

Global investors are recalibrating their strategies in response to these dynamics. The introduction of frameworks like MiCA and the U.S. GENIUS Act has provided clarity, enabling institutional participation in stablecoin issuance. Investors are increasingly leveraging blockchain analytics tools to trace illicit activity and enhance transparency. For example, stablecoins now account for 63% of illicit crypto activity, prompting exchanges to freeze suspicious addresses.

However, regulatory arbitrage remains a concern. Emerging market investors are gravitating toward jurisdictions with innovation-friendly rules, such as Singapore and parts of Asia, where tokenization of real-world assets (RWAs) is gaining traction. In India, the February 2025 Income-Tax Bill's 30% tax on crypto transactions has not deterred adoption, with 107.3 million users in 2025. Yet, the lack of formal banking access in Nigeria and the Philippines has driven reliance on crypto as an alternative, exposing users to scams like romance fraud and fake investment platforms.

The Path Forward: Collaboration and Vigilance

For global investors, the key lies in balancing innovation with risk mitigation. First, prioritizing jurisdictions with clear regulatory frameworks-such as those aligned with MiCA or the GENIUS Act-can reduce exposure to fraud. Second, adopting AI-driven fraud detection tools and collaborating with local regulators can enhance resilience. INTERPOL's Operation HAECHI VI, which recovered $439 million in 2025, exemplifies the power of cross-border cooperation.

Emerging markets themselves must address systemic vulnerabilities. Strengthening anti-money laundering (AML) compliance, as highlighted by the Financial Stability Board (FSB), is critical to preventing regulatory arbitrage. In Nigeria, training programs for financial institutions to combat fraud-rooted in the fraud diamond theory-offer a model for leadership-driven resilience.

Conclusion

The crypto landscape in emerging markets is a double-edged sword: it promises financial inclusion but demands vigilance against scams. For global investors, the path forward requires a dual focus on regulatory alignment and technological innovation. As the sector evolves, those who navigate these risks with foresight will be best positioned to harness the opportunities while safeguarding against the perils of a rapidly shifting digital frontier.