The recent crackdown by Chinese police forces on a large underground banking operation has shed light on the illicit use of the popular stablecoin Tether (USDT) in facilitating transfers totaling up to 13.8 billion yuan ($1.9 billion). The operation, headed by a criminal gang linked to the Chinese import and export business, used USDT to run a foreign exchange payment and settlement business, providing illegal services to smugglers and individuals acquiring foreign assets. This revelation has raised concerns about national foreign exchange supervision and financial security in China.
Following investigations since 2021, the Public Security Bureau of Chengdu Municipal arrested 193 suspects and froze 149 million yuan ($20.6 million) after raiding the operation’s location. The gang not only used USDT for fund transfers abroad but also collaborated with other companies to fraudulently obtain tax refunds. In addition, their operation extended to job-related crimes, smuggling of contraband goods, and financial fraud, such as obstructing credit card management and defrauding export tax refunds.
The discovery of the operation in November 2022 led to the Ministry of Public Security creating a task force that raided six municipalities, 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 across 26 provinces. This has prompted the Ministry of Public Security to launch a nationwide campaign against underground bank crimes. Moreover, a separate crackdown in Panshi City of the Jilin Province uncovered another underground bank involving 2.14 billion yuan ($296 million) in cryptocurrencies, leading to the arrest of six individuals, some wanted for crimes in South Korea.
The use of USDT in illegal underground banking operations poses a significant threat to China’s financial security. Not only does it evade national foreign exchange supervision, but it also enables criminals to engage in a range of illegal activities, including smuggling and financial fraud. The crackdown on these operations highlights the importance of enforcing regulations and monitoring the use of stablecoins to prevent illicit financial activities and safeguard the country’s economic stability.
The recent crackdown on illegal underground banking operations in China has exposed the widespread use of Tether (USDT) in facilitating illicit financial transactions. The arrests and seizures made by the Chinese police forces demonstrate a firm stance against such criminal activities. However, the continuous vigilance and enforcement of regulations are crucial to combatting underground banking and preserving the integrity of the financial system.
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