- Underground banks bought digital currencies and sold them for foreign currency
- Chinese nationals may not exchange foreign currency worth more than $50K a year
Chinese authorities busted a $2.2 billion underground financial operation that reportedly used foreign “digital currency trading platforms” to help its customers bypass the country's laws, Cointelegraph reported.
Crypto was used to bypass local restrictions
Chinese social media shared news a few days ago that Chinese police had intercepted an underground bank operation that used crypto to circumvent forex restrictions. Police inspector Xu Xiao explained that underground banks bought digital currencies and then sold them for foreign currency via trading platforms overseas.
According to Xiao, the process completes the exchange of yuan and foreign currencies, which constituted an illegal way of trading foreign currency.
Investigators seize Tether, Litecoin
Reportedly, police confiscated cryptocurrencies worth $28,000 (200,000 Chinese yuan), among which Tether and Litecoin. However, the whole operation was far more complex: organizers moved more than $2.2 billion (15.8 billion Chinese yuan) across over a dozen districts and provinces and at least a thousand bank accounts.
Under China’s legislation, Chinese nationals may not exchange foreign currency worth more than $50,000 a year unless they have a permit. Bypassing the laws is tantamount to money laundering under the country’s laws.
The real reason for the crypto ban
Some express the opinion that this form of state control is the real reason the Chinese government banned crypto in 2021. However, the Chinese government has said crypto was banned because criminals used it to launder illegal funds.
In 2016, China imposed strict foreign exchange laws, under which natural and legal persons had to comply with a “closed” capital account policy. In other words, they were not allowed to transfer money into or out of China unless they complied with the applicable regulations.
Persisting crackdowns on digital assets
In 2017, the government outlawed crypto exchanges. This was followed by the full ban on crypto four years later, which remains in effect.
In March this year, it was reported that Binance staff and volunteers helped customers in China bypass the exchange’s Know Your Customer (KYC) procedures. According to a December 23 report, Chinese users accessed the exchange by misrepresenting their location as Taiwan.
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