In a significant breakthrough, Chinese law enforcement agencies have dismantled a large-scale underground banking operation allegedly involved in facilitating illegal transactions worth over $2 billion using Tether's USDT stablecoin. The operation, which spanned multiple provinces, has led to the arrest of 193 suspects and the freezing of 149 million yuan in funds associated with the operation.

The investigation, initiated in November 2022, revealed that the criminal gang, led by Lin, Weng, Chen, and others, primarily operated within the import and export business sector and allegedly exploited USDT to provide illegal services to customers seeking to transfer funds abroad. Their activities included illegal foreign exchange, payment, and settlement businesses, which reportedly facilitated the smuggling of drugs and cosmetics, overseas asset purchases, and fraudulent tax refund schemes.

Tether has taken swift action to combat criminal operations using its digital currency, freezing approximately $5.2 million USDT in response to findings by crypto tracking and compliance platform MistTrack. The company has also implemented new security measures, including a tool developed in collaboration with Chainalysis to monitor secondary markets and detect suspicious transactions.

The crackdown on criminal operations using Tether's USDT highlights the company's commitment to combating illicit activity and ensuring the integrity of the cryptocurrency ecosystem. As the investigation continues, it remains to be seen how this will impact the use of stablecoins in illegal activities and the measures that will be taken to prevent such operations in the future.