- Chinese police in Chengdu uncover a vast $1.9 billion underground banking scheme utilizing the stablecoin Tether (USDT) for illegal transactions.
- The illicit network, spanning 26 provinces, involved 193 arrests and the freezing of assets worth approximately $20 million.
- Despite China’s strict crypto ban, local traders continue to engage heavily with stablecoins, finding ways to circumvent regulations.
In a major crackdown, Chinese police have dismantled an underground banking operation that managed a staggering $1.9 billion through the popular stablecoin Tether (USDT). This network, based in Chengdu, facilitated illicit transactions involving foreign currency exchanges using USDT.
Nationwide Operation and Arrests
Authorities have conducted a widespread operation across 26 provinces, resulting in the arrest of 193 individuals linked to these illegal activities. The underground banking operations, which commenced in January 2021, were primarily used for smuggling various items including medicine, cosmetics, and investment assets out of the country.
Seizures and Impact
In addition to the arrests, law enforcement agencies in Fujian and Hunan provinces successfully dismantled two of these illicit operations. Police have also frozen assets worth 149 million yuan (approximately $20 million), directly connected to the underground USDT transactions. This move signifies a significant blow to the underground financial network operating within China.
Persistent Crypto Usage Despite Bans
The Chinese government has historically imposed stringent bans on cryptocurrency-related activities, including trading and Bitcoin mining, in an attempt to regulate or limit the financial risks associated with digital currencies. Despite these prohibitions, Chinese citizens continue to engage with cryptocurrencies. A recent report by Kyros Ventures shows that 33.3% of Chinese investors hold stablecoins, making them some of the largest stablecoin holders globally.
Evading the Ban
Following the crackdown on centralized crypto exchanges, Chinese traders swiftly adapted by turning to decentralized exchanges (DEXs). This shift allowed them to continue their crypto transactions with less detection from authorities. Moreover, the use of decentralized finance (DeFi) protocols has seen a significant uptick among Chinese traders, who often utilize virtual private networks (VPNs) to bypass governmental restrictions.
Conclusion
The recent crackdown highlights the ongoing challenge for Chinese authorities in curbing unauthorized financial activities involving cryptocurrencies. Despite rigorous enforcement and regulatory measures, the persistence of such underground networks underscores the complexities of governing digital financial transactions.
