Chinese authorities have cracked down on a massive underground banking operation valued at $1.9 billion, according to a report by the Chengdu city police. The scheme, centered in the southwestern city, utilized the popular stablecoin Tether (USDT) to facilitate illegal foreign currency exchange and the movement of funds overseas.
The police report detailed the arrest of 193 suspects across 26 provinces and the dismantling of two additional operations in Fujian and Hunan provinces. The investigation revealed that the network, operational since January 2021, primarily dealt in smuggling medicine, cosmetics, and investment assets outside of China.
This bust highlights the persistent demand for cryptocurrency in China despite a comprehensive ban on crypto-related activities. The Chinese government has outlawed cryptocurrency exchanges, Bitcoin mining, and even transactions using digital assets. However, Chinese citizens have continuously found ways to circumvent these restrictions.
China’s Crypto Conundrum: Ban vs. Demand
A report by Kyros Ventures reveals a surprising statistic: Chinese investors rank second globally in stablecoin ownership, with 33.3% holding these cryptocurrencies. This data underscores the significant interest in crypto assets within China, despite the official ban.
The Chinese government’s approach seems like a game of whack-a-mole. When centralized exchanges were banned, Chinese traders turned to decentralized alternatives. Similarly, the recent crackdown on mining pushed Chinese operations underground, only to resurface later.
The Tether case demonstrates another creative workaround – utilizing stablecoins for illicit cross-border transactions. This incident raises questions about the effectiveness of China’s blanket ban and the potential for alternative regulatory approaches.
Also Read: Hong Kong’s Bitcoin ETFs Attract $258M in First Week, Signaling Bullish Investor Sentiment
The Future of Crypto in China
While the Chinese government maintains its hardline stance, the actions of its citizens suggest a strong underlying demand for cryptocurrency. It remains to be seen if authorities will pursue a more nuanced approach, potentially allowing for regulated crypto activity in the future.
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