Recently, the Chinese police forces unveiled a major underground banking operation that utilized the popular stablecoin Tether (USDT) to facilitate transactions totaling 13.8 billion yuan ($1.9 billion). This illegal operation was discovered by the Public Security Bureau of Chengdu Municipal, leading to the arrest of 193 suspects and the freezing of 149 million yuan ($20.6 million). The criminal gang behind the operation, which emerged from the Chinese import and export sector, utilized USDT for foreign exchange payment and settlement to offer illegal services to cosmetic and pharmaceutical smugglers and individuals seeking foreign assets.
Illegal Activities and Consequences
The investigations conducted by the police force revealed that the gang not only used USDT for fund transfers overseas but also collaborated with other entities to deceitfully acquire tax refunds. Furthermore, the utilization of USDT enabled them to circumvent national foreign exchange regulations, jeopardizing the country’s financial stability. Apart from operating an unauthorized foreign exchange settlement system, the gang was also involved in other criminal activities, including labor-related offenses, smuggling of prohibited items, and financial scams such as disrupting credit card management and swindling export tax rebates.
The crackdown on illegal banking operations extends beyond Chengdu, with the Ministry of Public Security establishing a task force in June 2023 to target underground banks in various cities across China. Subsequent raids in multiple municipalities resulted in the apprehension of additional suspects and the confiscation of numerous payment instruments like bank cards and U-shields. Notably, a separate raid in Panshi City, Jilin Province, uncovered another underground bank processing 2.14 billion yuan ($296 million) in cryptocurrencies, leading to the arrest of six individuals, some of whom were wanted for crimes in South Korea.
The exploitation of stablecoins like Tether for illegal activities not only undermines the integrity of the financial system but also poses a significant threat to a country’s financial security. The unauthorized use of digital assets for illicit purposes hampers regulatory oversight and can potentially facilitate money laundering, tax evasion, and other financial crimes. As a result, it is imperative for regulatory authorities to intensify their efforts to combat such unlawful practices and safeguard the integrity of the financial sector.
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