Chinese police have exposed a colossal $1.9 billion underground banking network utilizing the stablecoin Tether (USDT). The operation, centered in Chengdu, facilitated illegal foreign currency exchanges, leading to the arrest of 193 suspects across 26 provinces.

Authorities revealed that these underground USDT activities began in January 2021. The network primarily focused on smuggling medicine, cosmetics, and investment assets abroad. Two major operations in Fujian and Hunan were dismantled, and police froze assets worth 149 million yuan ($20 million).

Despite a stringent ban on crypto activities in China, traders continue to find ways to bypass restrictions, leveraging crypto assets for various transactions. A report from Kyros Ventures highlighted that Chinese traders are significant holders of stablecoins, with 33.3% of investors holding such assets, second only to Vietnam’s 58.6%.

The Chinese government has imposed a comprehensive ban on cryptocurrency use, exchanges, and Bitcoin mining. Nevertheless, the local populace has continuously evaded these restrictions. Even after the Bitcoin mining ban, China's contribution to the global Bitcoin network hash rate surged back to the second position within a year.

Similarly, after banning centralized exchanges, Chinese traders shifted to decentralized exchanges. The ban on crypto has also driven a significant increase in the use of decentralized finance (DeFi) protocols and virtual private networks (VPNs) to evade detection.

This latest crackdown underscores the persistent and innovative ways Chinese traders are circumventing national crypto bans, reflecting the ongoing cat-and-mouse game between regulators and crypto users in China.