According to local news, Sichuan police have busted a criminal ring accused of evading national exchange rate control and making illegal foreign exchange transactions with the Tether (USDT) stablecoin worth nearly $2 billion. Tether is a cryptocurrency pegged to the US dollar and acts as a bridge between the traditional financial system and cryptocurrencies. It is thought that the suspects tried to bypass strict exchange rate controls by using this method. While this highlights the role stablecoins play in integrating cryptocurrencies into the mainstream financial system, it also shows that they can become a tool for criminal activities.

Sichuan province has been a popular region for Bitcoin mining in the past due to its abundance of cheap hydroelectric power. This attracted miners looking for low-cost energy and contributed to China playing a major role in the cryptocurrency industry. However, the Beijing government radically changed this situation by completely banning cryptocurrency mining in 2021. This ban was considered an indicator of China’s increasingly harsh attitude towards cryptocurrencies.

The Sichuan underground banking network case was a national operation. Authorities also seized two underground banking centers located in other parts of China as part of the investigation. It is reported that the number of suspects detained exceeds 190. This large-scale operation reveals that the Chinese government is waging a serious fight against underground banking and illegal cryptocurrency activities.

In the statement made by the Supreme People’s Prosecutor’s Office (YHS) and the State Foreign Exchange Administration (DDDY) in late 2023, it was noted that stablecoins were increasingly used in illegal foreign exchange transactions. While stablecoins like USDT bring some of the benefits of traditional finance to the world of cryptocurrencies, they can also be used by criminal organizations. This highlights the challenges governments face in regulating cryptocurrencies.

The Sichuan underground banking network case clearly reveals the fundamental reasons behind the Chinese government’s harsh stance towards cryptocurrencies. Authorities want to strictly control the use of cryptocurrencies to maintain the stability of the financial system and prevent illegal activities. This may cause other countries to re-evaluate their approach to regulating cryptocurrencies.

While cryptocurrencies have the potential to revolutionize financial technology, preventing their illegal use is critical. One of the most important agenda items for governments in the coming years will be to ensure the balance between the benefits of cryptocurrencies and their illegal uses. To achieve this balance, it is necessary to take measures to prevent criminal activities while encouraging innovation. Solving this challenging equation will shape governments’ future policies towards cryptocurrencies.