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China Cracks Down on $1.9B USDT Underground Crypto Racket

The dismantling of this $1.9 billion underground banking network in China marks a critical moment in the ongoing global discourse on cryptocurrency regulation.

Chinese police have exposed a massive underground banking scheme involving $1.9 billion in Tether.
Credit: Foretoken Media 2024

BEIJING – In a significant crackdown, Chinese police have exposed a massive underground banking scheme involving $1.9 billion, centered around the popular stablecoin, Tether (USDT). Operating from Chengdu, this clandestine network facilitated foreign currency exchanges using USDT, in direct defiance of China's stringent crypto bans.

China's Underground Crypto Racket

In a sweeping action, authorities arrested 193 suspects spread across 26 provinces, dismantling two major underground operations in Fujian and Hunan. Additionally, the police froze assets worth approximately 149 million yuan ($20 million) connected to these illicit activities. This decisive response underscores the government's commitment to curbing financial crimes and maintaining strict control over cryptocurrency transactions within its borders.

The city of Chengdu became the focal point for this illegal operation, which began in January 2021. China's underground crypto racket utilized Tether to conduct illicit transactions, including the smuggling of medicine, cosmetics, and various investment assets abroad. This operation was not only a breach of financial laws but also posed significant risks to the economic stability and regulatory framework of the region.

Despite China's comprehensive prohibition on all cryptocurrency-related activities, including trading and mining, the resilience of Chinese crypto users is noteworthy. They continue to find innovative ways to engage with digital assets, circumventing bans through decentralized exchanges and utilizing virtual private networks to access DeFi protocols.

The Larger Picture: China's Crypto Landscape

A report by Kyros Ventures sheds light on the broader context, revealing that Chinese traders are among the world's largest stablecoin holders. Remarkably, 33.3% of Chinese investors hold various stablecoins, trailing only behind Vietnam. This persistent engagement with cryptocurrencies highlights a significant challenge for Chinese regulators aiming to control this digital frontier.

This incident not only emphasizes the ongoing battle between regulatory authorities and the evolving use of cryptocurrencies but also serves as a critical reminder of the challenges that lie in regulating decentralized digital assets. As countries around the world grapple with similar issues, the situation in China could offer valuable lessons on managing the balance between innovation and regulation.


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