China Cracks Down on First CBDC Money Laundering Case

Chinese authorities have cracked down on a gang using digital yuan wallets to launder illicit money.

Chinese Poice robot dog caught a CBDC money laundering crime.
Created by Kornelija Poderskytė from DailyCoin
  • China has cracked down on the first money laundering case involving digital yuan.
  • The police made multiple arrests in the case.
  • The suspects are detained as investigations widen.

Chinese authorities have taken down a criminal gang believed to have used digital yuan (CBDC) wallets to launder thousands in illicit proceeds sometime last year.

The digital yuan has been accessible in China since its pilot launch in Shenzhen in October 2020. While the project attained a landmark 1.8 trillion yuan (US$249 billion) transaction volume in June, criminal elements could have also contributed to the uptake.

China Dismantles Digital Yuan Money Laundering Gang

According to a report by local media outlet The Paper, the Shaoxing Public Security Bureau has arrested and detained seven individuals on fraud-related charges following a tip from a bank staff member in September.

The bank staff member alerted the police to “very abnormal” transaction activity on a merchant’s e-CNY wallet, which prompted the police to “immediately” set up a task force for further investigations.

The investigations led the police to Yuan Mou in Yuecheng, Shaoxing, and Zhili, Huzhou, who were all arrested, and several items were seized from them, including computers, 24,000 yuan in stolen money, and 500,000 yuan believed to be involved in money laundering.

Following the arrests and further interrogations, the police discovered an intricate web of money laundering activity that extended to overseas gangs.

Leveraging the Privacy of CBDC Payments to Launder Money

The report alleged that the criminal gang “took advantage of the high privacy of digital RMB payment transactions” to evade investigation and launder money.

Typically, the gang would travel to Shaoxing, Jinhua, Hangzhou, Jiaxing, and other places, wooing cigarette hotel owners to accept dubious payments from their digital yuan wallets at an 8% commission per thousand yuan.

After agreeing to the deal, the money would be sent to the hotel operator and withdrawn on the spot before the gang moved to another location to evade investigation and crackdown by the public or security agencies.

Although none of the gang members has been arraigned in court, the report insisted that the suspects were “criminally detained in accordance with the law” as the police concluded their investigation.

Read how Chinese officials were accused of taking bribes in crypto:
Chinese Officials Take Cold Wallet Bribes Despite Crypto Ban

Stay updated on China’s blockchain and Web3 initiatives:
China Goes All In on Web3, Blockchain, Despite Crypto Ban

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Brian Danga

Brian Danga, a Kenyan crypto reporter, is dedicated to delivering breaking news and updates from the cryptocurrency world. With a background as a Web3 writer and project manager, he recognizes the importance of unbiased reporting. Holding an LLB degree from the University of Nairobi, Brian's analytical skills contribute to his accurate news reporting. His personal interests include cooking, watching documentaries, reading, and engaging in intellectual discussions.