China cracks down on extensive Tether-linked money laundering

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China’s central bank has been cracking down on online gambling sites that have been using Tether stablecoin to allegedly launder money. The bank revealed recently that the sites are set up overseas and rely on USDT to bypass China’s strict capital control.

In a WeChat blog post, the People’s Bank of China (PBoC) delved into its recent efforts in cracking down on the illegal online gambling industry in China. The bank has been working with local authorities, assisting them by tracking down the movement of funds into these gambling platforms. One of the popular methods the players have relied on is the use of tether, the regulator revealed.

The PBoC detailed a recent case in which its Huizhou City branch uncovered a cross-border online gambling operation that relied on USDT for funds transfer. Through its tracing efforts, local authorities arrested 77 suspects and shut down three gambling platforms. They also recovered 120 million yuan ($17.9 million).

According to the watchdog, the operators laundered the USDT “through multiple layers so the capital flow was extremely elusive.”

In a separate incident, the bank’s efforts led to the shutdown of a gambling site that allegedly processed over $390 million.

The bank cautioned the public against engaging in online gambling. “The essence of cross-border gambling funds flow is illegal. Whether it is the outflow of betting funds or the return of illegal proceeds, they are all aimed at concealing the source and nature of illegal proceeds.”

Online gambling has continued to be big problem for the Chinese government, even though it has been outlawed for over 7 decades. As Japanese news outlet Coinpost reveals, China loses $150 billion annually to overseas online gambling platforms. Citing a Chinese Ministry of Public Security official, the outlet claimed that a substantial percentage of these funds is transferred through digital currencies.

The recent USDT crackdown is part of the PBoC’s efforts to stamp out digital currency fraud in China. In this regard, the bank has cracked down on over-the-counter (OTC) platforms in recent months. With digital currency exchanges being illegal in China, OTC platforms play a big role in the acquisition of digital currencies by Chinese citizens.

As CoinGeek reported in early 2020, police in the Asian country have been detaining OTC traders and platform operators to assist them with investigations. As per the police, the traders have been assisting them in their inquests into money laundering through digital currencies. One of China’s most prolific traders and a prominent Bitfinex investor Zhao Dong was among those arrested.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.