Bitcoin
China Raids on Forex Gangs Point to Crypto Ban Being Flouted
(Bloomberg) — Police raids in China to curb billions of dollars in illicit foreign exchange transactions have highlighted the country’s continued use of cryptocurrencies despite Beijing’s ban on digital asset trading.
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Alleged crypto cases flagged in May alone include an underground bank linked to 13.8 billion yuan ($1.9 billion) in illegal transfers, a gang implicated in about 2 billion yuan in unauthorized conversions, and illegal money changers which, in some cases, transacted more than 1 billion yuan. .
The alleged seizures – covering Beijing, the northeastern province of Jilin and the southwestern city of Chengdu – were flagged by municipal authorities and state media. They add to signs that Chinese demand still plays an important role in digital asset markets, more than two years after Beijing banned crypto transactions.
The ban reflected concerns about money laundering, currency outflows and environmental damage from energy-intensive Bitcoin mining. But it is still thought that Chinese citizens covet digital assets, either as alternative investments in a context of falling real estate prices, or as a way to circumvent limits on transfers abroad.
‘Porous’ curb
“A significant amount of crypto activity remains in China,” said Chengyi Ong, head of APAC policy at Chainalysis Inc. “This may be in part because the ban is porous or poorly enforced, but it is also attributable to decentralization and often peer-to-peer -to-peer nature of cryptographic activity.”
Finding out where digital asset traders are based is challenging as software can mask locations. Chainalysis examines blockchains and estimates that around $86 billion worth of cryptocurrencies flowed into China in the 12 months to June 2023 – significantly below pre-ban levels but still substantial globally.
A report on the case involving 13.8 billion yuan in transfers was released by the Chengdu City Public Security Bureau through WeChat, the social media platform. There have been 193 arrests for activities dating back to early 2021, according to the post, which adds that the Tether stablecoin was used to help illegally send funds abroad.
The gang accused of illicit transfers of 2 billion yuan acquired digital tokens in over-the-counter trades to help convert Chinese yuan into South Korean won, according to a WeChat post by the Public Security Bureau of Panshi city in Panshi province. Jilin.
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Underground gangs
In the example of illegal money changers, with some transactions exceeding one billion yuan, Beijing police claimed to have dismantled 11 underground gangs across the country, some using virtual currencies to hide their activity. This is based on a Xinhua report broadcast by state broadcaster CCTV.
Over the past year, there have been many glimpses of crypto trading activity in China, for example in the creditor profile of the collapsed FTX exchange, citizens who said they had used crypto platforms, and representations from industry experts on workarounds to crypto trading restrictions. Beijing.
Digital asset trading is permitted in Hong Kong, which in late 2021 focused on creating a crypto hub. But few if any commentators see Beijing easing official restrictions on the continent. The regulations also prevent Chinese citizens from readily accessing crypto investments in Hong Kong.
“What we have seen over the years is that bans are generally not effective in eradicating crypto activity, but can conversely create informal gray markets that are more difficult to track and protect against illicit activity,” said Ong.
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