China cracks down on crypto-related money laundering

More than 1,100 people arrested over phone and internet-based scams

China continues its anti-cryptocurrency policies with further investigations and arrests

Following extensive investigations and surveillance of suspected scammers, police in China have now arrested more than 1,100 people suspected of using cryptocurrencies to launder illegal proceeds from telephone and Internet scams in a recent crackdown, the Ministry of Public Security said.

The arrests are part of a continued effort by authorities in China to increase their crackdown on cryptocurrency trading. Last month, three industry bodies banned crypto-related financial and payment services, and China’s cabinet said it would clamp down on bitcoin mining and trading.

The Chinese public security ministry said that by Wednesday afternoon police had broken up more than 170 criminal groups involved in using cryptocurrencies to launder money. The scam the perpetrators used was simple: the money launderers charged their criminal clients a commission of between 1.5% and 5% to change their illegal proceeds into virtual currencies using crypto exchanges, the ministry announced on its official Wechat account.

Yesterday China’s Payment & Clearing Association said that the number of crimes involving the use of virtual currencies is on the rise. Because cryptocurrencies are anonymous, convenient and global in nature, “they have increasingly become an important channel for cross-border money laundering,” the association said in a statement.

Cryptocurrencies are quickly becoming the payment of choice when it comes to illegal gambling activities, with nearly 13% of gambling sites supporting the use of virtual currencies, and blockchain technology has made it more difficult for authorities to track the money, according to the association.

China banned financial and payment institutions from providing cryptocurrency-related services in mid-May on the back of their volatility. It said they posed serious risk to people’s property and could disrupt the normal economic and financial order. Internet platforms were also included in the ban, and insurance companies may not underwrite any firm that deals with virtual currencies in any way. Nevertheless, some overseas trading platforms can still be accessed from mainland China, and advertisements are still rife on Weibo and WeChat.