In a significant crackdown, Chinese police have exposed a massive $1.9 billion underground banking extortion scheme involving Tether, a popular stablecoin project. The illegal operations, which began in January 2021, were conducted in Chengdu, China, using Tether to exchange foreign currencies. The police have arrested 193 suspects across 26 provinces and dismantled two underground operations in Fujian and Hunan, freezing $20 million linked to USDT banking operations.

This noteworthy operation highlights the persistence of Chinese investors in using crypto assets despite a comprehensive ban on crypto-related activities in China. According to a report by Kyros Ventures, Chinese investors are among the largest stablecoin holders worldwide, with 33.3% owning various stablecoin projects. This is second only to Vietnam's 58.6%. The Chinese government has banned Bitcoin mining operations, cryptocurrency use, and crypto exchanges, but locals have found ways to circumvent these bans over the years.

China's relationship with cryptocurrency is complex, with the government enforcing bans while citizens continue to show interest in crypto assets. Despite the ban on Bitcoin mining, China was the largest contributor to the Bitcoin network hash rate, and within a year, its mining hash rate contribution rose to second place. Similarly, after the ban on centralized exchanges, Chinese investors turned to decentralized exchanges, and the use of decentralized finance-based protocols increased significantly. Some even use virtual private networks to defy the ban.

The persistence of Chinese investors in using crypto assets despite the bans highlights the growing demand for digital currencies. The government's efforts to regulate and ban crypto activities have not deterred investors, who continue to find alternative means to access and use crypto assets. As the crypto market continues to evolve, it will be interesting to see how China's stance on cryptocurrency changes in the future.