China’s Law Enforcement Discovers $2 Billion Underground Banking Operation Involving USDT
China’s police have recently uncovered a massive underground banking operation worth $1.9 billion, which was operating in violation of the country’s crypto bans. The Chengdu Municipal Public Security Bureau announced the discovery of this operation in a press release on May 15. The investigation into this illicit activity began in November 2022 when the Longquanyi District Branch of the Chengdu Municipal Public Security Bureau first detected its existence. It was revealed that the operation had started in January 2021 and was primarily involved in smuggling medicine, cosmetics, and investment assets abroad.
Since the investigation commenced, authorities have apprehended 193 suspects across 26 provinces and dismantled two major underground operations in Fujian and Hunan. The backbone of this illegal enterprise was the stablecoin Tether (USDT), which was used to circumvent national foreign exchange regulations and facilitate unauthorized foreign exchange transactions. By exploiting cryptocurrencies, the organization was able to carry out its illegal activities discreetly, enjoying anonymity and freedom from the oversight of intermediaries that are present in traditional payment systems.
Despite the Chinese government’s strict anti-crypto stance, which includes banning cryptocurrencies and cryptocurrency exchanges in 2021, citizens have found alternative ways to bypass regulations and gain access to crypto assets. Decentralized exchanges have played a crucial role in enabling crypto trading to continue in China. Following the ban on centralized exchanges, the use of decentralized finance-based protocols has witnessed a significant surge.
Some individuals have even resorted to using virtual private networks (VPNs) to conceal their activities and engage in undetected trading. As a result of these efforts, China has become the second-largest holder of stablecoins globally, with 33.3% of investors holding multiple stablecoins, according to a report by Kyros Ventures.
In a surprising turn of events, the recent introduction of Bitcoin and Ethereum exchange-traded funds (ETFs) in Hong Kong has provided Chinese investors with legal exposure to cryptocurrency. China AMC CEO Yimei Li stated that these ETFs represent a significant milestone in making cryptocurrency investments more accessible to mainland Chinese investors. Despite the ban on crypto trading in mainland China, Li believes that the official launch of these ETFs presents a new opportunity for Chinese investors to participate in the crypto market in the future.
This optimism has been reflected in the response from Chinese investors, who have flocked to these ETFs. In their first week, the Bitcoin ETFs secured a staggering $230 million in assets under management (AUM). This exponential growth demonstrates China’s eagerness to embrace cryptocurrencies, despite the restrictive regulations imposed by the government.
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