China is cracking down on crypto again

Chinese police appear to be stepping up their crackdown on cryptocurrency-related crime, according to the South China Morning Post.

According to the report, virtual currencies are being used in China to avoid Beijing’s strict capital controls, as well as for money laundering purposes.

Over the past year, the Yuan has been steadily depreciating, and the Chinese government has been trying to shore up the value of its currency.

China’s underwhelming recovery from the Covid-19 Pandemic has resulted in foreign investors losing interest in the country and its bonds, with foreign investors selling large amounts of Chinese bonds over the past few months.

Citizens have therefore also been looking for a way to convert their Yuan holdings into other currencies, and cryptocurrency has been one of the main avenues to do so.

The State Administration of Foreign Exchange, which regulates the Yuan’s exchange rate, monitors cross-border capital flows, and last month, fined 10 firms or individuals to ‘maintain the forex market order’.

Just this week, police also stated that they had frozen multiple wallets with a combined value of US$160 million, in relation to an online gambling case where cryptocurrencies were used.

On Monday, police in Shanxi also stated that they had busted a money-laundering case involving 380 million Yuan worth of USDT stablecoins.

Cryptocurrency is effectively banned in China, with crypto trading being outlawed for Chinese citizens both at home and abroad. Bitcoin mining is also heavily restricted, though Chinese miners seem to still be contributing a significant portion of the world’s mining operations.

Many of these restrictions have led to Chinese companies moving overseas, or to Hong Kong, which has been welcoming crypto companies despite being a part of China.