Chinese police have uncovered a secret $1.9 billion banking racket involving the popular stablecoin Tether (USDT).
The underground banking operation operates in the Chinese city of Chengdu and uses the stablecoin USDT to exchange foreign currencies. The city’s police released a media report outlining details of the covert operations and said they had arrested 193 suspects in 26 provinces.
The police report states that USDT covert banking operations began in January 2021 and were primarily used to smuggle medicines, cosmetics, and investment assets overseas.
Authorities took down two underground operations in Fujian and Hunan, and police also froze 149 million yuan, worth $20 million, linked to USDT banking operations.
Despite the complete ban on cryptocurrency activities in China, Chinese traders continue to circumvent the national ban and use cryptocurrency assets in alternative ways.
A report published by Kyros Ventures indicates that Chinese traders are among the largest holders of stablecoins in the world. The report notes that 33.3% of Chinese investors own a large number of stablecoins, second only to Vietnam’s 58.6%, indicating a higher level of risk appetite.
The Chinese government has banned the use of cryptocurrencies and cryptocurrency exchanges, as well as Bitcoin mining operations. However, residents have found ways to get around this ban over the years.
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At the time of the Bitcoin mining ban, China was the largest contributor to the Bitcoin (BTC) network’s hash rate, which dropped to near zero immediately after the ban. However, within a year, China’s mining hash rate contribution rose to second place, indicating that individuals continue to challenge the ban.
Similarly, after the country banned the use of centralized exchanges, Chinese traders turned to decentralized protocols for trade execution.
Following the ban, there was a significant increase in the use of DeFi-based protocols by Chinese traders, while some defied the ban by using virtual private networks (VPNs).
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