China’s crypto crimes expose capital-control loopholes, as millions in virtual currency seized

The degree to which cryptocurrencies continue to help people circumvent China’s capital controls is unclear, but recent big busts show they have not gone away since Beijing deemed them illegal

China is determined to keep the yuan’s value stable, but a rise in capital outflows continues to weigh on the yuan

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Chinese regulators have long banned the mining and trading of cryptocurrencies such as bitcoin, citing perceived threats to the financial system. Photo: Reuters

Published: 7:00pm, 19 Jul 2023

Chinese police appear to have stepped up their crackdown on cryptocurrency-related crimes in recent months – and their big seizures in a few prominent cases show how people are using virtual currency to bypass Beijing’s strict controls over the yuan.

With the yuan having gradually depreciated against the US dollar this year, reaching a rate of 7:1 for the fourth time since 2019, capital outflows have been on the rise. A higher yuan number means it takes more yuan to buy a US dollar, and the yuan is currently about 6.5 per cent weaker than it was a year ago.

On Tuesday, police in Jingmen, Hubei province, discussed an online gambling case in which virtual currencies were widely used to avoid regulation. It was said to involve 400 billion yuan (US$55.4 billion) worth of total turnover circulation, and more than 50,000 people.

Police did not say which virtual currency was used but said they had already managed to freeze multiple accounts with a combined value of US$160 million.

In a separate case on Monday, police in the central province of Shanxi said they had busted a money-laundering case involving 380 million yuan worth of USDT, a stablecoin issued by Hong Kong-based company Tether to mirror the price of the US dollar.