Chinese authorities have dismantled a massive $1.9 billion underground banking scheme involving the stablecoin Tether. This illicit operation, based in Chengdu, facilitated the exchange of foreign currencies using Tether. The police have apprehended 193 suspects spanning 26 provinces, shedding light on the extensive network of this underground financial system.
Details of the Operation
The police report revealed that these underground USDT banking activities commenced in January 2021, primarily smuggling pharmaceuticals, cosmetics, and investment assets abroad. In a major crackdown, authorities dismantled two significant operations in Fujian and Hunan, freezing 149 million yuan (approximately $20 million) linked to these activities.
Why Are Chinese Investors Defying the Ban?
Despite the stringent ban on cryptocurrency-related activities in China, investors continue to utilize crypto assets through alternative means. According to Kyros Ventures, Chinese investors are among the top stablecoin holders globally, with 33.3% of them owning various stablecoins. This places China second only to Vietnam in stablecoin ownership.
The ban has not deterred Chinese investors, who have found ways to circumvent these regulations. Following the prohibition on Bitcoin mining, China quickly regained its position as a significant contributor to the Bitcoin network hash rate. Similarly, the ban on centralized exchanges led to a surge in the use of decentralized exchanges (DEXs) and decentralized finance (DeFi) protocols.
Key Takeaways for Investors
– Despite stringent bans, Chinese investors remain heavily involved in the cryptocurrency market, demonstrating resilience and adaptability.
– The preference for stablecoins among Chinese investors highlights the demand for stable and secure digital assets.
– The crackdown on underground banking operations reflects the ongoing tension between regulatory efforts and investor ingenuity in China.
As the Chinese government continues to enforce bans on cryptocurrency activities, the persistent interest and innovative methods employed by Chinese investors to bypass these restrictions underscore the complex dynamics at play in the cryptocurrency landscape.