Authorities in China, spearheaded by the State Administration of Foreign Exchange (SAFE), recently executed a robust crackdown on an underground bank involved in illicit crypto-based exchange services. This targeted operation, spanning 17 provinces, intricately utilized over 1,000 bank accounts to facilitate transactions totaling a staggering 15.8 billion yuan, equivalent to approximately $2.2 billion.
Illegal exchanges in China facilitated 15.8 billion yuan worth of transactions
The core methodology of this operation revolved around acquiring cryptocurrencies on overseas exchanges and offering yuan exchange services within a complex, clandestine network. The epicenter of this crackdown unfolded in Qingdao, where diligent law enforcement efforts led to the identification of more than 1,000 accounts intricately linked to a Chinese national named Jin. These numerous accounts served as crucial conduits for the extensive exchange activities, orchestrating the flow of 15.8 billion yuan within the intricate landscape of crypto transactions.
The mastermind behind this operation was identified as Li, an ostensibly unrelated textile worker who played a pivotal role as a broker facilitating virtual currency transactions. Operating surreptitiously across 17 provinces, the underground exchange business managed to execute over 20 million transactions, underscoring the scale and sophistication of the illicit operation. Importantly, the report emphasized the illegality of managing and exchanging cryptocurrencies within the stringent Chinese regulatory framework governing financial transactions.
Xu Xiao, an inspector at the Qingdao Branch of the State Administration of Foreign Exchange, offered insights into the illicit process. Underground banks engaged in the systematic purchase of virtual currencies, subsequently navigating through the intricate web of overseas trading platforms to sell these acquired assets. This strategic maneuver aimed to obtain the requisite foreign currency, effectively completing the conversion between yuan and foreign currencies. In the eyes of Chinese authorities, this intricate process constituted a clear violation, characterized as the illegal act of buying and selling foreign exchange.
Modus Operandi and regulatory response
Crucially, regulations in China mandate that such exchanges should be conducted exclusively at state-designated venues, ensuring a controlled and monitored environment. Recognizing the potential allure of favorable exchange rates and perceived convenience, the SAFE authorities issued a stern warning against individuals engaging in such illegal trades. The cautionary note underscored the risks associated with circumventing legal channels and the potential consequences for those involved.
Huang Hui, Deputy Director of SAFE’s Management and Inspection Department, emphasized the ongoing commitment to collaborative efforts with other state institutions. This commitment extends beyond merely suppressing illegal exchange businesses, including underground banks, to actively promoting the utilization of legal channels for financial operations. The cooperative stance underscores the comprehensive approach adopted by Chinese authorities to safeguard the integrity of the country’s financial systems.
This decisive move aligns seamlessly with the government of China overarching stance on cryptocurrency activities. Despite the global proliferation of digital currencies, China has consistently reinforced its regulatory measures, maintaining a firm prohibition on various aspects of crypto transactions. The recent crackdown on this underground bank signals a proactive approach to enforce these.
