Chinese authorities in Sichuan have intensified efforts to dismantle underground banking networks, particularly focusing on USDT transactions amounting to billions of U.S. dollars.

In Sichuan province, police uncovered a large-scale underground banking operation involving Tether’s USDT stablecoin. Local reports indicate that the crackdown targeted suspects who allegedly evaded national foreign exchange supervision and facilitated illegal foreign exchange transactions involving nearly $2 billion worth of USDT.

The suspects reportedly used the stablecoin to bypass national foreign exchange regulations, providing illicit foreign exchange settlement channels. Authorities have shut down two underground banking hubs located in the provinces of Fujian and Hunan. The case spans 26 provinces in China, with over 190 suspects arrested nationwide.

Sichuan was previously significant in the crypto industry due to its affordable hydropower-generated electricity, which attracted Bitcoin miners seeking low-cost energy. However, the landscape changed rapidly following Beijing’s comprehensive ban on all crypto mining operations and transactions in the country.

In late 2023, the Supreme People’s Procuratorate (SPP) and the State Administration of Foreign Exchange (SAFE) highlighted criminal cases involving stablecoins. They emphasized that digital currencies backed by fiat currencies had become a popular intermediary for yuan trading with other currencies in illegal foreign exchange cases.

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