Chinese Authorities Crack Down on $1.9 Billion Covert Tether Banking Network
Summary:
Chinese authorities in Chengdu have dismantled a clandestine $1.9 billion banking network involving the trading of Tether (USDT) for foreign currencies. Initiated in January 2021, the covert operation was used primarily to smuggle an assortment of goods overseas. A total of 193 people across 26 provinces have been arrested. Despite China's strict prohibition on cryptocurrency activities, traders have consistently found ways to circumvent these regulations, reflected in the rise of decentralized protocol usage and stablecoin holdings.
In Chengdu, China, local law enforcement officers have busted a clandestine banking network worth over $1.9 billion, which traded prevalent stablecoin, Tether (USDT) for foreign currency. The illicit banking ring, which reportedly started operating in January 2021, was utilized primarily for smuggling goods such as cosmetics, medicine, and investment assets overseas. In total, 193 individuals across 26 provinces were apprehended in relation to this activity.
The report released by Chengdu police presented explicit details of these covert operations. Besides Chengdu, two similar operations in Fujian and Hunan were obliterated by the authorities. To facilitate the crackdown, monetary assets tied to the illegal USDT banking operations, amounting to 149 million yuan (approx $20 million USD) were seized and frozen.
Despite stringent prohibitions on crypto-related undertakings within China, traders still find ways around this national decree, employing cryptocurrencies in various unique ways. A research report by Kyros Ventures points out that Chinese traders are among the top holders of stablecoins globally. The report reveals that over a third (33.3%) of Chinese investors hold a significant quantity of stablecoins, with only Vietnam (58.6%) surpassing them, demonstrating their high risk tolerance.
Ignoring the Chinese government's ban on cryptocurrency and cryptocurrency exchanges, and the operational curtailment of Bitcoin mining, locals have managed to sidestep these prohibitions over the years. Interestingly, when the Bitcoin mining ban was put into effect, China was the primary contributor to the Bitcoin (BTC) network hash rate. This dropped dramatically, practically hitting zero, right after the ban. However, within a year, the contribution to the Bitcoin mining hash rate from China rose, placing the country second globally, showing that some are resiliently defying the ban.
In light of restrictions on the use of centralized exchanges, Chinese traders pivoted towards decentralized protocols. A notable increase in the DeFi-based protocols usage by Chinese traders was seen after this ban, with some submitting to the use of virtual private networks (VPNs) to bypass the prohibition.
Published At
5/16/2024 11:00:10 AM
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