China Police Unearth $2 Billion USDT Underground Banking Network

China Police Bust $2 Billion USDT Underground Banking Operation


By Harvey Hunter
Updated: May 16, 2024, 07:24 EDT
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Reading Time: 2 minutes


Chinese authorities have uncovered a massive underground banking operation worth $1.9 billion in USDT, defying the country’s crypto bans.
In a press release on May 15, the Chengdu Municipal Public Security Bureau announced the discovery of a significant underground bank operation.
The investigation began in November 2022 when the Longquanyi District Branch of the Chengdu Municipal Public Security Bureau first uncovered the operation.
However, it was found that the operation had started in January 2021 and primarily focused on smuggling medicine, cosmetics, and investment assets out of the country.
Since the investigation commenced, authorities have arrested 193 suspects across 26 provinces and dismantled two major underground operations in Fujian and Hunan.
The backbone of this operation was the stablecoin Tether (USDT), which was used to bypass national foreign exchange regulations and facilitate illegal foreign exchange transactions.
By exploiting cryptocurrencies, the organization was able to conduct its illegal activities without interference, as it provided anonymity and freedom from the oversight of intermediaries typically found in traditional payment systems.
Crypto Activity Persists Despite Crypto Bans
The Chinese government has taken a strict stance against cryptocurrencies, implementing bans on their use and crypto-related activities.
In 2021, China banned both cryptocurrencies and cryptocurrency exchanges. However, citizens have found alternative means to bypass regulations and access crypto assets.
Decentralized exchanges have allowed China to continue trading cryptocurrencies, and following the ban on centralized exchanges, the use of decentralized finance-based protocols has significantly increased.
Some individuals have defied the ban by using virtual private networks (VPNs) to mask their activities and trade undetected.
As a result of these efforts, China now ranks second globally in terms of stablecoin holdings, with 33.3% of investors holding multiple stablecoins, according to a report by Kyros Ventures.


Bitcoin ETF Provides Legal Crypto Exposure in China
Despite the crypto bans, the recent introduction of Bitcoin and Ethereum exchange-traded funds (ETFs) in Hong Kong has provided investors with legal exposure to crypto assets.
China AMC CEO Yimei Li stated that these ETFs represent a significant milestone in making cryptocurrency investments more accessible to mainland Chinese investors.
Although crypto trading is banned in mainland China, Li believes that the official launch of the ETFs presents a “new opportunity” for mainland Chinese investors to participate in this process in the future.
This belief has been proven true, as mainland Chinese investors have flocked to the ETFs. In their first week, the Bitcoin ETFs secured $230 million in assets under management (AUM).
This exponential growth demonstrates China’s eagerness to adopt cryptocurrencies despite the restrictive regulations imposed by the government.
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