Recently, the Chinese police forces uncovered a massive underground banking operation that was utilizing the popular stablecoin Tether (USDT) to transfer funds totaling up to 13.8 billion yuan ($1.9 billion). This operation was discovered by the Public Security Bureau of Chengdu Municipal, resulting in the arrest of 193 suspects and the freezing of 149 million yuan ($20.6 million). The underground banking operation was discovered to be run by a criminal gang with ties to the Chinese import and export business.
The illegal operation involved the use of USDT to run a foreign exchange payment and settlement business that catered to cosmetics and drug smugglers, as well as individuals seeking to acquire foreign assets. In addition to facilitating fund transfers abroad, the criminal gang colluded with other companies to fraudulently obtain tax refunds. This misuse of Tether not only allowed the gang to evade national foreign exchange supervision but also posed a significant threat to China’s financial security.
Nationwide Crackdown on Underground Banks
The discovery of this underground banking operation in Chengdu was just the beginning of a more extensive crackdown on such activities. In June 2023, a task force created by the Ministry of Public Security conducted raids in six municipalities across China, resulting in the arrest of 25 suspects and the seizure of various payment instruments. Subsequent raids in August 2023 led to the arrest of 168 individuals in 26 provinces, prompting the Ministry of Public Security to launch a nationwide campaign against underground bank crimes.
As part of this crackdown, the police in Panshi City of the Jilin Province recently dismantled another underground bank that had utilized 2.14 billion yuan ($296 million) in cryptocurrencies for illicit activities. This operation resulted in the arrest of six individuals, including suspects wanted for crimes in South Korea. These recent efforts by Chinese law enforcement highlight the ongoing battle against illegal underground banking operations and the misuse of cryptocurrencies like Tether.
The utilization of Tether in underground banking operations in China represents a significant challenge to financial security and regulatory authorities. The recent crackdown on these illicit activities underscores the need for continued vigilance and enforcement actions to combat such crimes effectively. It is imperative for authorities to stay ahead of criminals exploiting digital assets for illegal activities to protect the integrity of the financial system.