Chinese police in Chengdu discovered a $1.9B underground banking scheme using Tether stablecoin and arrested 193 suspects in 26 provinces.
The Chinese police have uncovered an underground financing scheme worth $1.9 billion that involved the well-known stablecoin Tether.
The illicit financial activities were conducted in Chengdu, China, utilizing the USDT stablecoin as a medium of exchange for foreign exchange. In a media release, the city police detained the clandestine operations and announced the apprehension of 193 suspects spanning 26 provinces.
According to the police report, the underground USDT banking operations commenced in January 2021 and were primarily used to smuggle investment assets, cosmetics, and medicine abroad.
In addition to destroying two clandestine operations in Fujian and Hunan, the police suspended 149 million yuan associated with the USDT banking operations, which were valued at $20 million.
Notwithstanding the stringent prohibition on crypto-related activities within the nation of China, Chinese merchants continue to find ways to bypass the prohibition and exploit crypto assets in non-traditional ways.
According to a report published by Kyros Ventures, Chinese traders possess a significant portion of stablecoins on a global scale. The report highlights that a significant proportion of Chinese investors (33.3%) possess a substantial quantity of stablecoins, second only to Vietnam’s 58.6%; this proportion suggests a greater propensity for risk.
The Chinese government has prohibited bitcoin mining operations and the use of cryptocurrencies and cryptocurrency exchanges. Over the years, however, the local populace has developed methods to circumvent this prohibition.
China was the leading contributor to the Bitcoin network hash rate prior to the mining prohibition, which dropped to almost zero immediately after the ban was implemented. However, Chinese mining hash rate contribution climbed to second place within a year, suggesting that individuals continue to circumvent the prohibition.
Likewise, subsequent to the nation’s prohibition of centralized exchanges, Chinese merchants resorted to decentralized protocols to conduct business.
Chinese traders significantly increased their use of DeFi-based protocols in the aftermath of the ban, with some even circumventing it via virtual private networks (VPNs).
