Myanmar: Transnational Networks Plan Digital Dodge in Casino Enclaves
Blockchain, cryptocurrency, and encrypted payment applications enable investors in Karen State’s gambling cities to scale up illicit activities.
Editor’s Note: This is the first of a three-part series. The next article will explore the details of the digital systems employed in Myanmar’s gambling enclaves and demonstrate how they threaten to entrench corrupt armed governance in ethnic minority areas of the country.
The plans transnational crime groups have for Myanmar’s border region with Thailand are by no means easy to understand. Shards of information lie scattered across China, Myanmar, Cambodia, the Philippines, and Thailand. They appear in various languages in publicity videos on the internet, in business plans circulated on social media, and in white papers released by companies and individuals launching increasingly sophisticated schemes. The outline becomes clear, however, after cutting through denials and obfuscations, untangling local and international politics, and assembling the fragmentary data: A multinational cohort of individuals, linked to cross-border criminal activity, has allied with local armed groups in Myanmar to establish a base of operations beyond the reach of its civilian government. This creates an optimal environment to tap into the $25 billion-a-year illegal online gambling market in the People’s Republic of China.
In these borderlands, cities are emerging from what was once remote farmland or virgin forests, designed by transnational Chinese criminal networks as platforms to proliferate illegal online gambling, money laundering and other illicit activities.
It's complicated enough that these audacious plans involve land, roads, casinos, and homes in enclaves in Myanmar’s conflict-torn Karen State, but it turns out that these are just the hardware.
Of equal importance is the software that enables these activities to target the market back in China. Blockchain, cryptocurrency, and encrypted currency transfer applications allow the operators of Myanmar’s casino cities to launder money from bank accounts across the region. Previously, Chinese authorities thwarted offshore gambling operations by simply following the money and freezing bank accounts that transferred money from China to online casinos. The plans in Karen State foil tracking by law enforcement agencies.
Blockchain Zone
The first of Karen State’s Chinese investors, Yatai International Holdings Group (IHG), advertises its project as a “Smart City,” one that includes high-end housing estates for as many as half a million people, casinos and recreation centers, an international airport, and a massive “blockchain special economic zone” on the Thai border.
In its online ads, Yatai IHG and its business partners make clear that the term “Smart City” means a digital space impervious to law enforcement and regulation. Careful analysis of these online materials leaves little doubt that Yatai IHG intends to carve out an autonomous fiefdom, in which the company alone provides its own security, public utilities, health services, and even management of land ownership. Through the introduction of a new mobile currency exchange and payment app, coupled with the city’s own blockchain ledgers, the Yatai IHG has made Myanmar’s currency, its land registration authorities, and its Central Bank irrelevant in the new zone.
This project, christened Yatai New City by Yatai IHG, dates from early 2017, when it forged an agreement with the leader of the Karen Border Guard Force (BGF), Chit Thu. Yatai IHG presents itself as a Hong Kong registered company with headquarters in Bangkok. The company is headed by She Zhijiang, a mysterious Chinese entrepreneur who somehow obtained Cambodian citizenship in 2017 and uses multiple aliases. Yatai IHG claims to have secured 120 square kilometers (46.3 square miles) of land along the Moei River in the Myanmar-Thai border area in what was formerly a village called Shwe Kokko. The purported goal is to make a “significant contribution to China’s Belt and Road Initiative” and to support plans by the Thai and Myanmar governments to construct an “East-West” Economic Corridor.
Financial Infrastructure
In reality, Yatai’s plans have nothing to do with either of these grand economic initiatives. Its so-called Special Economic Zone related to the corridor is a complete fiction because the Myanmar Investment Commission has approved nothing more than a $22.5 million development of a handful of luxury villas on 25.5 acres of land in Shwe Kokko.
Instead, under the armed protection of the BGF, a para-military unit that reports to the Myanmar armed forces, Yatai IHG has secretly developed numerous illegal structures throughout Shwe Kokko over the past three years to host “technology” and “entertainment” companies in this remote part of Karen State. Most ominously, Yatai IHG and its Singapore-based partner, Building Cities Beyond Blockchain (BCB), have moved rapidly to introduce a virtual financial infrastructure into Karen State that will enable casino operators and their clients to inject vast sums of money into this illicit business.
By early 2019, thousands of Chinese workers had been lured to Shwe Kokko to build and work in these facilities, a development that attracted the attention of local civil society and media. Residents of the area began asking why Chinese labor was arriving in Karen State in such large numbers and why technology and entertainment companies were locating in such a remote place.
In February 2020, two other companies, one from Thailand and another from Malaysia, followed Yatai’s footsteps to establish their own copy-cat cities, also partnering with local Karen armed groups. Promotional materials describe these cities in similar fashion as “smart cities,” with one of them already involved in the development of its own virtual financial infrastructure. As the three projects began laying claim to upwards of 160 square kilometers of land in adjacent areas, scrutiny by local civil society and media intensified. This brought to light the real purpose of the cities: gambling.
Chinese Entrepreneurs
Further analysis of the business networks behind the projects found all three had been deeply involved in the operation of online and in-person casinos in Cambodia and the Philippines, where their activities had become the target of Chinese law enforcement cracking down on online gambling. Under Chinese law, it is illegal for Chinese citizens to operate online casinos overseas or to promote online casinos in China, even if those casinos are legally registered and licensed outside of China. The casino operations of these Chinese entrepreneurs, presenting themselves as overseas Chinese, were clearly aimed at an audience in China itself.
It has been argued, incorrectly, that these projects do not involve Chinese nationals, and are outside of China’s jurisdiction. In fact, the executive director of Yatai IHG, Ma Dongli, who hails from China’s Shandong province and was featured on China’s CCTV, is the majority shareholder of Yatai’s Beijing-based company, which promotes the Yatai New City, the Yatai Smart Development Technology and Trade Co, Ltd. (亚太智慧发展（北京）科贸有限公司).
These projects are currently the focus of an investigation launched by the Myanmar State Counsellor’s office, and have also been the topic of formal discussion between senior officials of the two countries. These represent very positive developments toward weeding this nefarious activity out of Myanmar’s Karen State. Even so, the complexity of the plans, the location in an area under the control of militia groups, and the digital firewall that has been erected to hide the activities, will seriously challenge these efforts.
