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Chinese Authorities Take Down $2 Billion Underground Banking Operation Chinese Authorities Take Down $2 Billion Underground Banking Operation

Key Takeaways

Chinese authorities have disrupted a massive illegal underground banking network that was transferring an estimated $2.2 billion between China and other countries. The operation bypassed China’s strict capital controls by using cryptocurrencies to facilitate the illicit fund transfers.

Details of the Case

The State Administration of Foreign Exchange (SAFE) announced on WeChat on December 24 that it had dismantled the underground banking operation. According to SAFE inspector Xu Xi, the network bought cryptocurrencies like Tether (USDT) and Litecoin (LTC) in China and sold them through foreign trading platforms to obtain foreign currencies.

During investigations, authorities reportedly confiscated cryptocurrencies worth around $28,000. The illegal banking network covered over 1,000 bank accounts across 17 Chinese provinces and municipalities.

Both the mining and use of cryptocurrencies like Bitcoin are banned in China. However, cryptocurrencies have been used for years to bypass China’s strict capital controls which limit citizens to converting only up to $50,000 of yuan per year into foreign currency.

Capital Controls and Crypto Ban

China implemented capital controls in 2016 to prevent capital flight from the country and maintain stability of the yuan. These restrictions, along with the country’s crypto ban thought to be motivated by the same goals, have reportedly pushed underground banking networks and cryptocurrency adoption.

Despite the risks, many Chinese citizens and businesses continue to find ways to utilize cryptocurrencies for foreign currency transfers and financial activities not permissible within the country’s regulated financial system.

The latest case demonstrates the challenge Chinese authorities face in enforcing the crypto ban and capital controls, which large-scale illegal operations continue to circumvent.

What are your thoughts on this massive underground banking network in China? Let me know on Twitter: @AlthallaNews

Chinese Authorities Take Down $2 Billion Underground Banking Operation


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