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Chinese Police Bust $1.9 Billion Underground USDT Bank…

Chinese Police Arrest Illegal USDT Stablecoin Users

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

Nationwide crackdown results in 193 arrests

In a nationwide raid, Chinese police arrested 193 suspects in 26 provinces. The focus of the underground banks was in Chengdu, the capital of Sichuan Province. Authorities have frozen 149 million yuan (about $20 million) related to the USDT bank fraud.

Source: X

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

The racket mainly targeted customers who were smuggling drugs and cosmetics and purchasing assets abroad. It also helped fraudulently obtain tax refunds by collaborating with other companies.

USDT’s role in circumventing the crypto ban

China has introduced a sweeping ban on cryptocurrencies, including the use of exchanges and Bitcoin mining operations. However, Chinese traders continue to circumvent these bans. According to a report from Kyros Ventures, Chinese traders are among the largest stablecoin holders in the world. The report shows that 33.3% of Chinese investors own a significant amount of stablecoins, followed by Vietnamese 58.6%.

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 engaged in such transactions. Despite the bans, the Chinese population has repeatedly found ways to escape the restrictions over the years.

Notably, Chinese traders have resorted to decentralized protocols to conduct trades following the crackdown on centralized exchanges. Additionally, there has been a significant increase in the use of DeFi-based protocols by Chinese traders, while some have defied the ban and used virtual private networks (VPNs).

The revelation of this large-scale underground banking operation highlights the ongoing challenges authorities face in enforcing crypto-related regulations in China. Furthermore, it also highlights the ongoing demand for crypto assets and the ingenuity of some individuals to circumvent restrictions.

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