China’s State Administration of Foreign Exchange (SAFE) has targeted underground banks that provide illegal exchange services using cryptocurrencies. The operation, uncovered by Qingdao police, involved more than 1,000 bank accounts linked to a Chinese national named Jin. This individual facilitated a currency exchange business, raising as much as 15.8 billion yuan ($2.2 billion) in funds to purchase cryptocurrencies on overseas exchanges and provide yuan currency exchange services.
The illicit currency exchange operation orchestrated more than 20 million transactions across 17 Chinese provinces. During the crackdown, an account linked to Mr. Jin, which was operated as a funneling account, was also traced. Mr. Lee, a textile worker, acted as a broker managing the buying and selling of virtual currency. In particular, the report highlighted the illegality of cryptocurrency management and exchange in China.
Xu Xiao, an investigator at the Qingdao Branch of the State Administration of Foreign Exchange, explained the modus operandi of the illegal procedure. Underground banks acquire virtual currency and then sell it through overseas trading platforms to secure the necessary foreign currency. According to Xiao, these schemes constituted the illegal act of buying and selling foreign currency. The report reiterated that such exchanges should take place in locations designated by the state.
Despite the lure of favorable exchange rates and convenience, SAFE authorities have warned against engaging in this illegal practice. Huang Hui, Deputy Director of SAFE Management and Inspection Department, emphasized the continued efforts to cooperate with other state agencies. The purpose is to crack down on illegal currency exchange businesses such as underground banks and promote the use of legitimate channels for financial operations.