Initial investigations revealed that the bank accounts of two involved, Jin Moudong and Shen Mou, had a large and frequent flow of money, signaling illegal foreign exchange operations. Subsequently, it was discovered that more people were involved in the scheme.



China Bitcoin cart.

In a note published last Friday (10), the Chinese Police claimed to have dismantled a clandestine banking scheme in the city of Panshi. In total, 6 people were arrested and 2.14 billion yuan (R$1.5 billion) in cryptocurrencies and other assets were seized.

According to the text, those involved used cryptocurrencies to provide illegal exchange services between the Chinese currency, the yuan, and the South Korean currency, the won.

Initial investigations revealed that the bank accounts of two involved, Jin Moudong and Shen Mou, had a large and frequent flow of money, signaling illegal foreign exchange operations. Subsequently, it was discovered that more people were involved in the scheme.

Suspect of operating an illegal bank in China pointing to cards and identity documents used in the scheme. Source: Reproduction.

China breaks down scheme that used cryptocurrencies in international exchange

Although the police revealed the value of the seizure, 2.14 billion yuan (R$1.5 billion), they did not provide further details about which assets were seized. In any case, the sum reveals that the scheme was gigantic and cryptocurrencies played a fundamental role in its operation.

“The police discovered that the criminal group used internal accounts to receive and transfer funds, carry out OTC cryptocurrency purchase and sale transactions and settle Korean won, as well as illegally engaging in the foreign exchange business, assisting groups such as Korean buyers , cross-border e-commerces and foreign trade companies converting Chinese currency to Korean won”, points out the text.

Cryptocurrencies have been banned in the country since 2021. However, China's war against virtual currencies precedes the popularization of Bitcoin. In 2009, for example, the government had already banned virtual currencies, such as those used in games, and intensified the pressure in the following years with the arrival of cryptocurrencies.

Regardless, the operation carried out last week seems to have had a different focus. In other words, the police's focus was to dismantle a clandestine banking scheme used by customers from different areas.

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China faces resistance against its digital currency

Amid pressure on the use of cryptocurrencies, China also launched its CBDC (Central Bank Digital Currency). However, the digital yuan is experiencing resistance in adoption.

This is because some public servants are receiving their salaries in e-CNY, but are preferring to exchange it immediately for cash. According to the South China Morning Post, the reasons for this range from functionality limitations to privacy concerns.

“Cash is used anonymously, but the digital yuan is different,” said Ye Dongyan, a researcher at the Cheung Kong Business School in Beijing. “The boundaries between information tracking and information protection need more deliberation.”

Therefore, it is possible that more and more underground banks will emerge in China, like the one that was dismantled, as the use of the digital yuan becomes more and more common in China.