Chinese authorities have uncovered a massive illegal underground banking network valued at $1.9 billion allegedly using cryptocurrencies in its operations to evade scrutiny after a two-year investigation, according to local reports.
Authorities have arrested 193 suspects nationwide in connection with this case and frozen assets worth 149 million yuan (about $20 million). The group, headed by individuals with the last names Lin, Weng, and Chen, allegedly operated an illicit scheme that exchanged foreign currencies using USDT.
The Chengdu Municipal Public Security Bureau reportedly claimed the underground operations began in January 2021 and were involved in smuggling medicine, cosmetics, and investment assets overseas. They noted that they became aware of the illegal activities in November 2022 and immediately set up a task force to investigate them. Throughout 2023, in collaboration with the Chinese Ministry of Public Security, they were able to bust the crime gang and arrest suspects across 26 provinces in the country.
This revelation comes after another case in Jilin province, where authorities, according to local reports, discovered an underground bank using cryptocurrency for money exchanges. Six people were arrested, including suspects from South Korea, and over 2.14 billion yuan ($295 million) was involved.
The Chinese government banned cryptocurrencies, digital asset exchanges, and Bitcoin mining operations in the country since 2021. However, the ban has not deterred the local population from finding alternative ways to engage with crypto assets.
A report by Kyros Ventures revealed that Chinese traders are among the largest holders of stablecoins globally. 33.3% of investors hold various stablecoins, second only to Vietnam’s 58.6%.
Following the Bitcoin mining ban, China’s hash rate contribution to the Bitcoin network dropped from the largest to the second largest. Chinese traders also shifted to decentralized exchanges after the ban on centralized exchanges. Some reportedly resorted to using virtual private networks (VPNs) to bypass the ban.
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