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FEATURE STORY: Thousands of bank accounts have been frozen
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Thousands of bank accounts have been frozen

By Sam Wei

BT 202011 FEATURE 01The bank accounts of over 4,000 over-the-counter traders from the Chinese region of Guangdong involved with cryptocurrency have allegedly been frozen in accordance with local law enforcement. In recent weeks, China’s central bank and related authorities have been freezing some customers’ bank accounts and credit cards, and their online digital payment accounts on WeChat Pay, Alipay, etc., resulting in increased discomfort and panic within the Chinese crypto community.

Citizens realized that their cards were frozen in the aftermath of a wider investigation into illegal activities such as gambling and money laundering, which have been commonly facilitated by crypto OTC trading with the stablecoin Tether.

BT 202011 FEATURE 02The most recent operation involved the branch of the Peoples’ Bank of China in the city of Huizhou, Guangdong province, where they worked with local police to dismantle three gambling sites and arrest 77 suspects who used Tether in cross-border transactions to launder their proceeds. The money that was laundered amounted to nearly 120 million yuan. It not only involves bank transfers but also virtual currencies and has been ‘laundered’ through multiple layers so the capital flow was extremely elusive.

A considerably high number of accounts were found to be directly or indirectly related to the plan, and while investigations are still ongoing, these accounts have been frozen for a temporary period. Frozen accounts are not guaranteed to be involved in illegal activities and can evidently be restored after an evaluation of their activities reveals no wrongdoings. Local law enforcement is supposedly learning blockchain analysis skills in order to track on-chain crypto-asset deals.

Some affected individuals have had multiple cards frozen as well, and within the industry, some miners were also unable to access their own accounts, but understood that in these situations, it is unavoidable that authorities would freeze any related accounts while the case is still open. Nevertheless, this leaves the question of whether users are allowed to purchase cryptocurrency with their bank accounts, Alipay or WeChat Pay.

Multiple banks in China, such as the Bank of China, the Agricultural Bank of China and others have come forth to clarify that banks will only freeze accounts that are related to criminal and illicit activities such as money laundering or scams. Accounts of legal crypto-related businesses and individuals that purchase cryptocurrency from ‘legal’ sources have nothing to be concerned about.

Some crypto OTC accounts have reportedly been put on a blacklist maintained by the Peoples’ Bank of China and are forbidden to use bank-issued cards for the next three years or conduct online transactions in the next five years. The rules apply to all blacklisted accounts and are not limited to cryptocurrency accounts. This process requires a bank’s risk system to report flagged and restricted transactions from a certain account to a relevant regional bank of the PBoC.

BT 202011 FEATURE 03China has strict limits on money transfer and buying foreign currency. This has resulted in most people still using underground banks for money transfer or settlement of exchange. China’s foreign exchange regulatory authorities have clarified the criteria for the illegal trading of foreign exchange; if the amount of illegal foreign exchange transactions exceeds 100,000 yuan, people involved in that transaction can be convicted.

The central bank explained that online gambling sites are usually set up with the help of overseas servers, and provide a variety of ways to allow domestic users to bypass the country’s capital control. This gives the users a way to wire money overseas.

Cryptocurrency transactions cannot be stopped by authorities, and crypto wallets do not need to be linked to personal identities in the way that bank accounts are. Because of these features, crypto is occasionally used by tech-savvy criminals for money laundering purposes. As Cointelegraph reported, threat intelligence firm Insights claimed that cryptocurrencies are increasingly being used for money laundering.

The lack of unified laws across all banks would mean an OTC business would find itself on the blacklist regardless of its legitimacy. China has no concrete laws on cryptocurrencies either, thus leaving the asset class as a legal gray area, and hence susceptible to the judgement of individual banks. However, the banks advise citizens to have separate accounts and cards for cryptocurrency trades so that when unforeseen circumstances such as the above occur, individuals will still have access to their main accounts.

BT 202011 FEATURE 04如果您从事贸易业务,您肯定听说今年以来,大量外贸从业人员抱怨自己的银行账户无故遭冻结。有人说朋友圈基本天天有厂家收到通知银行账户被冻结,原因不明。这些涉事用户多数不清楚银行卡被冻结的具体原因,只知道圈内出现大量类似事件。


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