Chinese police illegal currency exchange office using USDT to exchange currencies

In southeastern China, in Sichuan province, police busted an illegal currency exchange office that used the USDT stablecoin to exchange currencies. The transaction value was at least 13.8 billion yuan, or USD 1.9 billion. According to preliminary investigators' findings, the illegal currency exchange office has been operating since January 2021.

Illegal currency exchange office in China – USDT was used to circumvent regulations

Since 2021, China has been pursuing an extremely restrictive and aggressive policy towards digital assets. Although in theory the use of cryptocurrencies and bitcoin mining is prohibited by law, the Chinese are not very willing to comply with strict regulations. The illegal cryptocurrency trade is booming, and Hong Kong's extremely liberal regulations regarding digital assets are tempting cryptocurrency users from mainland China.

One example of such activity is an illegal currency exchange office that was recently busted by police from Sichuan Province. The illegal currency exchange office used the USDT stablecoin to exchange currencies, and the value of the group's banking activities is estimated at 13.8 billion yuan, or USD 1.9 billion. The criminal group had been operating since 2021 and was led by three criminals named Lin, Weng and Chen. A total of 193 suspects were arrested across the country in connection with the case, and the authorities, in cooperation with the police, froze assets worth 149 million yuan.

China is on the trail of illegal cryptocurrency exchange offices

Although the above-described case received wide coverage in the Chinese media, it is not the only such situation. A similar action took place a few weeks ago in Jilin province, where a secret bank was discovered that also uses cryptocurrencies for currency exchange. The activities of this illegal entity were estimated at USD 295 million.

The illegal currency exchange office that bases its operations on stablecoins is the result of China's restrictive policy towards the cryptocurrency market. This, in turn, is caused by the desire to quickly and effectively implement CBDC, i.e. digital yuan. Tests of the digital currency have been carried out for months, and in some provinces CBDC is used, for example, to pay for public transport. Although mainland China has given tacit consent to the introduction of spot ETFs based on BTC and ETH, there is no indication that the Chinese authorities will loosen the loop around cryptocurrencies.