Chinese authorities have dismantled a $1.9 billion illicit banking scheme involving the widely-used stablecoin, Tether.

The illegal banking operations were based in Chengdu, China, where Tether was utilized for foreign currency exchanges. According to a police media release, 193 suspects were arrested across 26 provinces.

The report detailed that these underground Tether (USDT) banking activities started in January 2021, primarily facilitating the smuggling of medicine, cosmetics, and investment assets abroad.

Law enforcement successfully shut down two of these operations in Fujian and Hunan, seizing assets totaling 149 million yuan (approximately $20 million) connected to the scheme.

Despite stringent crypto bans in China, traders continue to find ways to bypass these restrictions and engage with cryptocurrencies creatively.

Kyros Ventures published a report revealing that Chinese traders are some of the world's largest stablecoin holders.

According to this report, 33.3% of Chinese investors possess various stablecoins, making them second only to Vietnam, where 58.6% of investors hold stablecoins.

The Chinese government has prohibited all cryptocurrency-related activities, including trading and Bitcoin mining.

Yet, the local populace has consistently found loopholes to circumvent these prohibitions.

Notably, China was the dominant force in Bitcoin network hash rate before the mining ban.

However, within a year of the ban, Chinese contributions to the mining hash rate climbed back to second place.

Following the ban on centralized exchanges, Chinese traders shifted their focus to decentralized exchanges.

Post-ban, there was a notable increase in the use of decentralized finance (DeFi) protocols among Chinese traders, with many also using virtual private networks to defy the restrictions.

Sources:

https://cointelegraph.com/news/chinese-police-bust-usdt-underground-banking-ring

https://mp.weixin.qq.com/s/JAD9WLy3Iw1E9zXxR4e_Nw?poc_token=HB-XRWajjXW6ijLFVjLWFGd8Pb_fpgEAJw_pHhE-