Tech
Chinese police have busted an illegal cryptocurrency ring worth nearly $2 billion
In a recent development, Chinese police have uncovered a massive underground banking racket in the city of Chengdu, involving the popular stablecoin Tether (USDT). The illegal operation, which facilitated the exchange of foreign currencies, is estimated to be worth around $1.9 billion.
The news arrives a few days later reports that Chinese authorities have blocked another very similar operation which facilitated the illegal exchange of currency between the Chinese yuan and the South Korean won, using cryptocurrency as a medium.
According to a media report released by Chengdu city police, 193 suspects in 26 provinces were arrested in connection with the clandestine banking operation. Authorities also successfully dismantled two related operations in Fujian and Hunan provinces. Additionally, police froze 149 million yuan (about $20 million) related to illegal USDT banking activities.
Circumvent China’s cryptocurrency ban
The clandestine banking operation reportedly began in January 2021 and was mainly used to smuggle medicines, cosmetics and investment goods abroad. Despite China’s blanket ban on cryptocurrency-related activities, Chinese traders continue to find ways to bypass the ban and use cryptocurrencies through alternative means.
A report by Kyros Ventures reveals that Chinese traders are among the largest stablecoin holders in the world, with 33.3% of Chinese investors holding multiple stablecoins, second only to Vietnam’s 58.6%.
In recent years, the Chinese government has implemented a series of bans on cryptocurrency use, trading, and Bitcoin mining operations. However, the local population has consistently found ways to circumvent these restrictions.
Following the Bitcoin mining ban, China’s contribution to the Bitcoin network’s hash rate initially decreased, but surprisingly it rose to second place within a year, despite the ban. Similarly, after the country banned centralized exchanges, Chinese traders shifted their focus to decentralized exchanges and significantly increased the use of decentralized finance-based protocols. Some traders have even resorted to using virtual private networks to defy the ban.
Although Chinese authorities are largely hostile to cryptocurrencies, some local developments are still occurring in the sector. Hong Kong Fund Managers sought approval for spot ETFs on Bitcoin and Ethereum in mid-April they saw them be approved a few days later. Earlier this month, both products it became available on the local exchange.