Just before Christmas, Chinese authorities blocked a massive illegal banking operation. The operation illegally transferred up to $2.2 billion abroad via foreign crypto exchanges.
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Huge illegal banking operation in China failed
Over Christmas it was announced on Chinese social media platforms that special Chinese police units had uncovered the illegal operation.
A network of so-called “underground banks” is said to be using cryptocurrencies to circumvent Chinese capital controls and currency restrictions.
These banks would secretly exchange Chinese yuan for foreign currency. The banks would do this using crypto on foreign crypto exchanges, but that is illegal.
“Underground banks buy digital currencies and then sell them through foreign trading platforms to obtain the foreign currency they need.
This completes the conversion of the yuan, which is an illegal act of buying and selling foreign currencies,” said inspector Xu Xiao.
$2.2 billion in capital flowed through crypto exchanges
The Chinese police therefore searched banks in more than 17 provinces and cities. Thousands of accounts are said to be involved in the illegal operation.
Only 2 million yuan worth of cryptocurrencies were seized, including Tether (USDT) and Litecoin (LTC). This corresponds to around 280,000 US dollars or 253,000 euros.
However, the entire operation has already brought more than 15.8 billion yuan out of the country, equivalent to $2.2 billion or two billion euros.
Bitcoin ETFs will be given a deadline for their final adjustments
Government and Regulation
Crypto ban to prevent capital flight
The Chinese government applies strict measures and restrictions on currency exchange to prevent the so-called capital flight. Chinese citizens can circumvent these restrictions through such underground banking networks, but the government is clearly not happy with this.
Chinese are allowed to exchange a maximum of 50,000 US dollars in foreign currency per year. Bypassing these limits is considered money laundering by the Chinese government.
The dismantling of banking operations is part of the fight against capital flight from China. In recent years, more and more capital has fled the country and the government is trying to prevent this.
Preventing capital flight is reportedly one of the real reasons the country banned crypto. The Chinese state itself says that the ban on crypto is intended to prevent the laundering of criminal proceeds, but it does not support this on chain Events.
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