Chinese Police Bust $1.9 Billion Underground Bank Using USDT

Chinese Police Bust
Chinese Police Bust Underground USDT Stablecoin Users

Chinese police in Sichuan province have busted an underground bank using the USDT stablecoin for illegal currency exchanges. The operations, centered in Chengdu, facilitated transactions worth at least $1.9 billion. Authorities targeted individuals involved in smuggling goods and purchasing overseas assets. This led to the arrest of 193 suspects across 26 provinces, the operation began in January 2021.

Nationwide Crackdown Nets 193 Arrests

In a nationwide crackdown, Chinese police arrested 193 suspects across 26 provinces. The underground banking operations were centered in Chengdu, the capital of Sichuan province. Authorities froze 149 million yuan (approximately $20 million) linked to the USDT banking racket.

Chinese Police, Chinese Police Bust $1.9 Billion Underground Bank Using USDT
Source: X

The criminal gang, led by suspects named Lin, Weng, and Chen, leveraged USDT as a medium to evade foreign exchange supervision. They provided illegal foreign exchange settlement channels, posing a threat to China’s financial security.

The racket primarily serviced customers involved in smuggling drugs, cosmetics, and overseas asset purchases. It also assisted in fraudulently obtaining tax refunds by cooperating with other companies.

USDT’s Role in Circumventing Crypto Ban

China has implemented a comprehensive prohibition on cryptocurrency, including the use of exchanges and Bitcoin mining operations. However, Chinese traders persist in circumventing these bans. According to a report by Kyros Ventures, Chinese traders are among the largest stablecoin holders globally. The report shows that 33.3% of Chinese investors hold a significant amount of stablecoins, second only to Vietnam’s 58.6%.

Chinese Police, Chinese Police Bust $1.9 Billion Underground Bank Using USDT
Source: Kyros Ventures

Authorities also dismantled two underground operations in Fujian and Hunan provinces. This highlights the widespread nature of these illegal activities. Certainly, the USDT stablecoin remains a popular choice for those engaging in these operations. Despite the bans, the Chinese population has consistently found ways to evade restrictions over the years.

Notably, after the crackdown on centralized exchanges, Chinese traders turned to decentralized protocols to carry out trades. Additionally, there was a significant spike in the use of DeFi-based protocols by Chinese traders, while some defied the ban using virtual private networks (VPNs).

Above all, the uncovering of this large-scale underground banking operation highlights the ongoing challenges faced by authorities in enforcing crypto-related regulations within China. Moreover, it also underscores the persistent demand for crypto assets and the ingenuity employed by some individuals to circumvent restrictions.

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