A Landmark Case: Money Laundering with Chinese Digital Yuan and Cryptocurrency
A Shanghai court has set a significant legal precedent by issuing a verdict in the first instance of money laundering using Chinese digital yuan and cryptocurrency. The Yangpu District People’s Court of Shanghai concluded this landmark case, which involves laundering criminal activity-related money with crypto and digital yuan.
The Operation of a Point Racing Team
Xiao, the leader of the money laundering group known as a “point racing team,” hired “racers” to launder money and profit from fees. Once Xiao confirmed that the amount to be laundered was clean with the clients, racers would purchase cryptocurrencies from private traders, particularly Tether (USDT), and then transfer the USDT to the clients’ wallets in exchange for an equivalent amount of digital yuan.
The Process of Money Laundering
The racers would proceed with the accounts and withdraw cash from ATMs. They would then deposit the cash withdrawn from the digital yuan wallets into their own accounts and transfer the money to clients’ designated accounts, completing the process of money laundering.
Introduction of Anonymous Wallets for Digital Yuan
To promote Chinese digital yuan, four types of e-CNY wallets were introduced, including Type 4, which is an anonymous wallet used by Xiao’s point racing team. Opening a Type 4 account does not require users to be physically present in a bank or provide identification documents; they only need to verify a mobile number.
Exploiting Anonymity and Withdrawal Limits
Although Type 4 wallets offer anonymity, they have relatively low deposit and transfer limits. To overcome this limitation, Xiao’s team purchased numerous phone numbers and more than 30 smartphones. They managed to withdraw over 10 million yuan ($1.6 million) from over 900 digital yuan accounts.
Bank Alert and Subsequent Arrests
In May 2023, one of the racers named Wang made multiple withdrawals within a short period of time, raising suspicion at the bank. The frequent transactions led to an investigation, arrests, and subsequent court proceedings.
Verdict and Sentences
The court found Xiao’s point racing team guilty of disguising and concealing proceeds of crime. The eight individuals involved received fixed-term imprisonments ranging from seven months to four years and six months, along with fines. Gong and Huang, who sold USDT to the racers, were also found guilty and received one year and four months of fixed-term imprisonment with fines.
Hot Take: A Landmark Case in China’s Crypto Crime History
A Shanghai court’s verdict in the first digital yuan money laundering case marks a significant milestone in China’s legal approach to crypto-related crimes. This landmark case demonstrates the authorities’ commitment to combat money laundering and illicit activities involving digital currencies. It also highlights the challenges posed by anonymous wallets and the need for robust regulations to prevent such criminal activities. The outcome of this case will likely serve as a precedent for future crypto-related legal proceedings in China.
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