Chinese authorities have dismantled a significant underground banking network utilizing the widely-used stablecoin Tether (USDT) to facilitate transfers amounting to 13.8 billion yuan ($1.9 billion).

Reportedly, the Chengdu Municipal Public Security Bureau apprehended 193 individuals associated with the operation, freezing assets totaling 149 million yuan ($20.6 million) following a raid.

The operation, spearheaded by a criminal syndicate with roots in Chinese import and export enterprises, utilized USDT for illicit foreign exchange payments and settlements. These services catered to individuals involved in smuggling cosmetics, drugs, and other contraband, as well as locals seeking foreign assets.

In addition to facilitating fund transfers abroad, the syndicate collaborated with other entities to fraudulently obtain tax refunds, circumventing national foreign exchange regulations and posing a threat to financial security.

Apart from its involvement in illegal foreign exchange activities, the syndicate was implicated in various crimes including job-related offenses, smuggling, and financial fraud such as credit card manipulation and export tax refund scams.

Authorities first uncovered the operation in November 2022 during a drug-related investigation. Subsequent raids in June and August 2023 across multiple cities led to the arrest of additional suspects and the confiscation of numerous payment instruments, including bank cards.

The crackdown in Chengdu is the latest in a series of efforts by Chinese authorities to combat underground banking activities. Just this month, another operation in Panshi City resulted in the dismantling of an underground bank dealing in cryptocurrencies worth 2.14 billion yuan ($296 million), leading to the arrest of six individuals, including suspects wanted for crimes in South Korea.