Sichuan police uncover underground finance scheme involving $2b in USDT

Chinese police in Sichuan reportedly intensified crackdowns on underground banking networks, with a particular focus on USDT transactions totaling billions of U.S. dollars.

Chinese police in the Sichuan province reportedly uncovered a wide-scale underground banking scheme, with operations reportedly involving the use of Tether‘s USDT stablecoin. According to local reports, the crackdown targeted suspects allegedly evading national foreign exchange supervision and facilitating illicit foreign exchange transactions involving nearly $2 billion worth of USDT.

The suspects purportedly utilized the stablecoin as a means to circumvent national foreign exchange regulations and provide illicit foreign exchange settlement channels, the report says. Authorities are said to have shut down two underground banking hubs located in the Chinese provinces of Fujian and Hunan. The case reportedly spread across 26 provinces in China, with over 190 suspects arrested nationwide by the police.

Although Sichuan previously played a significant role in the crypto industry due to its cheap hydropower-generated electricity, attracting Bitcoin miners seeking low-cost energy for their operations, the landscape changed quickly following Beijing’s blanket ban on all crypto mining operations and transactions in the country.

In late 2023, the Supreme People’s Procuratorate (SPP) and the State Administration of Foreign Exchange (SAFE) underscored criminal cases involving stablecoins, highlighting that digital currencies backed by fiat currencies had become a popular intermediary for yuan trading with other currencies in cases involving illegal foreign exchange.