Chinese officials recently shut down a hidden banking network worth $2.2 billion, which utilized foreign digital currency platforms to help people dodge China’s financial controls.
On December 24, reports emerged on Chinese social platforms stating that authorities had found an illegal bank using cryptocurrency to get around foreign exchange rules.
Xu Xiao, an official from the Qingdao branch of the State Administration of Foreign Exchange, clarified, “Underground banks purchase virtual currencies and then sell the virtual currencies through overseas trading platforms to obtain the foreign currency they need.”
He mentioned that the process was about illegally exchanging yuan and other foreign currencies.
During the investigation, officials reportedly confiscated digital currencies valued at $28,000, equivalent to 200,000 Chinese yuan. These included assets like Tether, Litecoin (LTC), and others. The entire scheme involved moving funds exceeding $2.2 billion (or 15.8 billion Chinese yuan) through over a thousand bank accounts across 17 different regions.
In China, individuals are generally restricted from swapping more than $50,000 in foreign currencies annually unless they have official permission. Bypassing these restrictions is viewed as money laundering by the Chinese government.
While some people think that China’s strict control over capital is the primary reason for its negative view on cryptocurrencies, the government claims its crypto ban is to prevent illegal financial activities.