Chinese police have unearthed a $1.9 billion underground banking racket involving the popular stablecoin Tether.
The underground banking operations operated in the Chinese city of Chengdu, where the Tether (USDT) stablecoin was used to exchange foreign currencies. The city police issued a media report highlighting the details of the underground operations and said they had arrested 193 suspects across 26 provinces.
The police report noted that the underground USDT banking operations began in January 2021 and were primarily used to smuggle medicine, cosmetics and investment assets overseas.
The authorities destroyed two underground operations in Fujian and Hunan, and the police also froze 149 million yuan worth $20 million linked to the USDT banking operations.
Despite a comprehensive prohibition on crypto-related activities in China, Chinese traders persist in circumventing the national ban and utilizing crypto assets in alternative ways.
A report published by Kyros Ventures indicates that Chinese traders are among the largest stablecoin holders worldwide. The report shows that 33.3% of Chinese investors hold several stablecoins, ranking them second only to Vietnam’s 58.6%.
The Chinese government has banned the use of cryptocurrency and cryptocurrency exchanges, along with Bitcoin (BTC) mining operations. However, the local population has found ways to evade such a ban over the years.
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At the time of the Bitcoin mining ban, China was the largest contributor to the Bitcoin network hash rate. However, within a year of the ban, Chinese mining hash rate contribution rose to second place despite the ban.
Similarly, after the country banned centralized exchanges, Chinese traders turned to decentralized exchanges.
In the wake of the ban, Chinese traders’ use of decentralized finance-based protocols significantly spiked, while some defied the ban using virtual private networks.
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