The underground network operating in the city of Chengdu was using Tether to exchange foreign currencies. This is a practice frequently seen especially in countries such as China that implement capital controls. The network also used this method to smuggle pharmaceuticals, cosmetics and investment assets abroad.

A press release by the city police announced that 193 suspects from 26 different districts were arrested and two underground operation centers in Fujian and Hunan provinces were closed. Additionally, funds linked to USDT banking operations worth 149 million yuan (about $20 million) were frozen.

This operation is the latest in the Chinese government’s fight against cryptocurrencies. A number of bans have been implemented since 2017, such as banning cryptocurrency exchanges, restrictions on Bitcoin mining in 2021, and more recently blocking access to decentralized finance (DeFi) protocols.

But Chinese investors continue to look for alternative ways to use cryptocurrencies, despite the government’s harsh stance on crypto. A report published by Kyros Ventures reveals that Chinese investors are among the largest holders of stablecoins worldwide. The report states that 33.3% of Chinese investors own more than one stablecoin. This rate is second only to Vietnam with 58.6%.

There are several reasons why cryptocurrency activities continue despite the bans of the Chinese government. The first is the appeal of cryptocurrencies, which have become part of China’s powerful underground economy. Second, the existence of technologies such as virtual private networks (VPNs) used to bypass China’s internet censorship and restrictions. Finally, the censorship-resistance and decentralization features offered by cryptocurrencies make them an attractive option for Chinese investors looking to avoid government control.

So where is this struggle in China going? Experts predict that the government will likely implement stricter laws and regulations to curb the use of cryptocurrencies. However, there is no guarantee that even this will completely thwart Chinese crypto investors’ efforts to find alternative paths. Given other countries’ more positive attitudes towards cryptocurrencies, China’s crackdown on the cryptocurrency market could push Chinese investors to overseas exchanges. This could disrupt the government’s objectives in controlling capital flows.

In conclusion, this incident in China shows that activities can continue despite the ban on cryptocurrencies. This makes it imperative for governments and regulators to examine cryptocurrencies more closely and create a comprehensive regulatory framework.