Chinese ‘Criminals Used Digital Yuan to Launder Money’ – Prosecutors

Tim Alper
Last updated: | 2 min read
Chinese banknotes pinned to a clothesline string with clothespins.
Source: dule964Adobe

Chinese law enforcers say they have shut down a gang that was using digital yuan wallets to launder money.

Per the media outlet The Paper, the gang was allegedly active in the Yuecheng District, in the municipality of Shaoxing, Zhejiang Province.

The Shaoxing Public Security Bureau said it had arrested and detained seven people on fraud-related changes.

The bureau said a bank employee alerted the police on September 16 last year after noting “very abnormal” transaction activity on a merchant’s e-CNY wallet.

The police “immediately” set up a task force to investigate. They eventually “determined” that the wallet was being used to collect funds for “groups of overseas fraudsters.”

A map of China with Zhejiang Province colored in red.
China’s Zhejiang Province. (Source: TUBS [CC BY-SA 3.0])

Police eventually swooped on several addresses in Yuecheng and the Zhili District in Huzhou.

Officers said they seized some 20 mobile phones, as well as “computers and other equipment.”

They also froze over $3,370 worth of funds in digital yuan wallets and bank accounts.

The bureau added that the group had used e-CNY wallets to process some $70,000 worth of laundered funds.

Chinese Fraudsters Turning to CBDC-powered Crime?

The media outlet claimed that the alleged criminals “took advantage of the high privacy functions of digital yuan transactions.”

The gang also allegedly thought that it would be extremely difficult for law enforcers to “investigate” funds laundered in e-CNY.

Police said the group had been active “since the beginning of September.”

And officers said the group raised digital yuan tokens by duping hotel owners in cities like Shaoxing, Jinhua, Hangzhou, and Jiaxing.

The group allegedly told hotel operators that they could receive 8% commission fees if they swapped digital yuan coins for cash.

A bureau spokesperson warned the public that “participating” in private “digital yuan exchange” transactions “for profit” was “fraud.” The spokesperson added:

“The public must be wary of any attempts from third parties to ask for digital [yuan] app login details or passwords. Failure to do so could result in the loss of property and funds.”

Police and courts in China have warned of a significant rise in digital yuan-related crime.

Earlier this month, a Shanghai court convicted a group of criminals that exploited CBDC exchange functions on an ATM to steal “almost all” of the machine’s cash reserves.