Chinese police have discovered a secret $1.9 billion banking racket involving currency

Chinese police have discovered 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 USDT stablecoin to exchange foreign currencies. The city police issued a media report highlighting the details of the secret operations and said that they arrested 193 suspects in 26 provinces.

The police report noted that USDT’s undercover banking operations began in January 2021 and were primarily used to smuggle medicines, cosmetics and investment assets abroad.

Authorities destroyed two underground operations in Fujian and Hunan, and police also froze 149 million yuan worth $20 million linked to USDT’s banking operations.

Despite the comprehensive ban on cryptocurrency-related 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 merchants are among the largest holders of stablecoins worldwide. 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.

Source: Kiros Ventures

The Chinese government has banned the use of cryptocurrencies and cryptocurrency exchanges, along with Bitcoin mining operations. However, locals have found ways to evade this ban over the years.

Related: China’s most valuable company turns to artificial intelligence as gaming profits falter

At the time of the Bitcoin mining ban, China was the largest contributor to the Bitcoin (BTC) network hash rate, which fell to near zero immediately after the ban. However, within one year, China’s mining hash rate contribution rose to second place, indicating that individuals continue to challenge the ban.

Likewise, after the country banned the use of centralized exchanges, Chinese traders turned to decentralized protocols for trade execution.

In the wake of the ban, there has been a significant rise in the use of DeFi-based protocols by Chinese traders, while some have defied the ban using virtual private networks (VPNs).

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