Last Monday, Chinese media reported that police in Guangdong froze thousands of bank accounts belonging to over-the-counter traders.
It was reported last week that thousands of bank accounts belonging to Chinese over-the-counter cryptocurrency traders were recently frozen by law enforcement. The police claimed that this was part of a wider investigation into illegal activities, such as money laundering. Reports noted that these investigations specifically targeted OTC trades using the stablecoin Tether (USDT).
According to Sonny Wang, the head of Longmen Capital Japan, this was merely part of an everyday exercise by Chinese police.
Wang says that the Chinese police targeted an agent service that buys USDT on behalf of a money laundering group. There were some who participated in this activity through the platform that had no awareness about the purpose of buying USDT. Others apparently contributed as a part-time job.
It is alleged that such platforms allow criminals to split their dirty money into small pieces for a small fee.
Chinese law enforcement, no matter how small the office, has the power to close individual bank accounts at their discretion. “So you have to understand that in China your account can be frozen at any time,” said Wang.
“It was surprising for many and became huge news. But for OTC traders in China, it is not unusual and happens frequently. It is just that too many people got their accounts frozen”
Many account holders saw access to their funds returned, once Chinese police had determined the individuals had done nothing wrong.
A clear endorsement?
As a result of 4000 accounts being frozen, holders asked China’s Big Four Banks (the Industrial & Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China, and the Bank of China) whether they are able to purchase cryptocurrencies at all. Their answer, Wang explained, can be seen as an endorsement of crypto trading at a proper OTC market.
“As long as a funding source is not problematic and the proper route was used they wouldn’t freeze their accounts”
Wang sees this as a positive response, as it endorses crypto trading in a “grey zone” area in China.
In September 2017, the Chinese government banned crypto trading at Chinese exchanges. Since then, Chinese traders continue to buy and sell cryptocurrency using OTC markets.