'I made four transactions, and my bank card was frozen three times. The last time I chose Alipay, but it was also frozen because the system deemed the transaction abnormal.'
Buying but not daring to sell, and profits that are difficult to turn into real wealth. While Bitcoin prices continue to hit historical highs, similar experiences hang like a dark cloud over every cryptocurrency trader.
Since its birth, despite frequent large price fluctuations, Bitcoin has become a well-known alternative asset recognized and traded by an increasing number of people, with prices continually rising. On the other hand, Bitcoin's semi-anonymity has become a breeding ground for certain criminals to hide their identities, transfer funds, and evade foreign exchange controls. Especially since 2017, after several countries including China severed paths to purchase Bitcoin and other digital assets with fiat currency, various stablecoins pegged 1:1 to the dollar like USDT and USDC have become foundational tools in the cryptocurrency space, providing more convenient and risk-free channels for the aforementioned activities.
Since 2020, with multiple departments including the Ministry of Public Security and the Central Bank joining forces to crack down on cross-border gambling funding chain actions, behaviors such as money laundering and fund transfer using virtual assets like Bitcoin and stablecoins have come under closer regulatory scrutiny. If involved in certain illegal fund dissemination chains, such as selling virtual currencies at suspected OTC merchants or being deemed an abnormal transaction by banks, bank cards will be frozen, with the freeze lasting from three days to two years. In more severe cases, individuals may be instructed by public security to cooperate with investigations and explain the origins of their funds.
Amidst the sweeping card-freezing trend, although cryptocurrency prices are rising towards the end of the year, there is a palpable sense of fear within the community. A seasoned player complained to Tencent News (Qianwang) that after boldly buying in since the low point of Bitcoin prices in March and then betting on some DeFi concept assets, earning over 10 million this year, the widespread experiences of friends being card-frozen have made them hesitant to attempt cashing out, opting instead to convert funds into stablecoins for storage on exchanges.
'A few years ago, the cryptocurrency space was not so mixed, so KYC was easier to implement. However, in the past two years, it has become mixed with fish and dragons, with some funds related to fraud, gambling, or even drugs trying to use virtual currencies to launder money through various disguises. A little carelessness could lead to trouble,' described an OTC merchant who specializes in virtual asset over-the-counter trading to Tencent News (Qianwang). Although this portion of funds accounts for a very small percentage, once involved, the entire upstream and downstream of the funding dissemination chain would be implicated, leading to card freezes or even more severe consequences.
Tencent News (Qianwang) has learned from regulatory insiders that the Central Bank and the Foreign Exchange Bureau have long had comprehensive regulatory measures for these risks and there are dedicated departments directly responsible. 'For example, on the day the stablecoin Libra released its white paper, we asked them to explain the associated risks.' Under the increasing trend of strengthening anti-money laundering and regulating the flow of cross-border gambling funds, the crackdown on gray behaviors in the cryptocurrency space will only become stricter in the future.
This also means that the card-freezing trend may just be beginning. 'Compliance is the only way forward.' A co-founder of a leading exchange told Tencent News (Qianwang) that exchanges need to ensure strict checks at the source and implement more stringent audits for the qualifications of OTC merchants.
Stablecoins have become an excellent vehicle for money laundering.
Since its inception in 2009, Bitcoin has rapidly gained worldwide popularity due to its limited supply, decentralization, and semi-anonymity, attracting much attention.
However, these characteristics have also led to Bitcoin being used by a minority of criminals for various gray areas. Utilizing Bitcoin to bypass central bank foreign exchange controls and transfer capital out of the country has also become one of its purposes.
An extreme case was during the abnormal fluctuations in the A-share market in 2015, when the trading company Yishidun sought to transfer massive amounts of funds through Bitcoin after making over 2 billion yuan in profits through high-frequency trading.
Tencent News (Qianwang) learned that at that time, Yishidun found the trading platform Bitcoin China, but relevant personnel from Bitcoin China revealed that Yishidun did not pass the corresponding real-name verification, and the transaction amount was enormous, raising the platform's vigilance and leading to the rejection of Yishidun's transaction request.
However, the large price volatility and slow transaction speeds of Bitcoin do not provide a sufficient safety cushion for money laundering activities. With the development of the virtual asset market, stablecoins that connect fiat and virtual assets have become attractive to criminals due to their ability to provide value preservation in the volatile virtual asset market. They have not only become the foundational currency in the cryptocurrency space but also a more efficient and safer vehicle for money laundering.
Among them, USDT (known as 'Tether' in Chinese) is the most widely used stablecoin in the market, with a current total market value exceeding $19 billion. This stablecoin was launched by Tether, where 1 USDT is equivalent to 1 dollar, and users can exchange USDT for USD at a 1:1 ratio. Tether claims to adhere to a 1:1 reserve guarantee, meaning that for every 1 USDT token issued, there will be 1 dollar of funds secured in its bank account.
Regarding the risks posed by stablecoins, domestic regulators have long been vigilant. Mu Changchun, the director of the Central Bank's Digital Currency Research Institute, has repeatedly stated that global stablecoins pose numerous risks to public policy and regulation, such as legal certainty, governance, anti-money laundering, counter-terrorism financing, regulation of weapons of mass destruction, payment system security, market stability, personal privacy and information protection, consumer and investor protection, and tax compliance challenges. They could very likely lead to the complete opening of underground economic channels and become tools for illegal transactions.
The Financial Action Task Force (FATF), an international authority on anti-money laundering, also pointed out that stablecoins could lead to changes in the virtual asset ecosystem and cause significant money laundering and terrorist financing risks.
'All kinds of people have entered,'
The money laundering risks triggered by virtual assets, especially stablecoins, are the fundamental reason for the entire cryptocurrency space falling into a card-freezing trend.
A virtual asset wallet founder told Tencent News (Qianwang), 'The biggest problem in the past two years is that all kinds of people have entered the cryptocurrency space, and we cannot get involved with these individuals.' Another OTC merchant who has worked in the field for many years lamented that when starting in this line of work, customer audits were primarily to prevent telecom fraud funds. However, with the rise of overseas gambling and pig-butchering schemes, these 'people' are often behind funds related to gambling or even drugs, attempting to use over-the-counter trading for cross-border fund transfers or money laundering.
'A little carelessness could lead to a 37-day package waiting for you, or even direct imprisonment.' This merchant described that a colleague was treated as a funding intermediary for gambling due to incomplete KYC execution and had to prove their ignorance to public security for 37 days before being released. The bank cards of cryptocurrency traders who conducted transactions with him were also frozen.
At a meeting held in September, Liao Jinrong, director of the International Cooperation Bureau of the Ministry of Public Security, introduced the situation regarding the crackdown on cross-border gambling crimes. He revealed that preliminary statistics indicate that over 1 trillion yuan in gambling-related funds flows out of the country each year, exacerbating economic and financial security risks amid increasing downward economic pressure. From a criminal perspective, some gambling gangs utilize virtual currencies to collect and transfer gambling funds, even engaging in online gambling in Myanmar under the guise of investment. These new types of channels are non-freezable, anonymous, and difficult to trace, posing significant challenges for enforcement efforts.
In October, the Central Bank disclosed that the Huizhou Central Sub-branch of the People's Bank of China assisted local police in cracking a cross-border online gambling case using the virtual currency Tether (USDT). A total of 77 criminal suspects were arrested, three gambling websites were shut down, and the amount involved was nearly 120 million yuan. This case involved not only funds flowing within bank accounts but also virtual currencies, and through multiple rounds of laundering, the flow of funds became extremely concealed.
'We are now trying to implement pure transactions, simply put, every transaction of money and cryptocurrency must be audited separately. But this is just an ideal; if every transaction is to be audited, we would basically block 99% of users out,' said the aforementioned virtual asset wallet founder, indicating that under tightening regulation, OTC merchants are finding it increasingly difficult to operate.
To avoid bank card freezes, cryptocurrency traders have summarized various experiences internally, such as not using salary cards or commonly used cards for transactions, as freezing would disrupt mortgage and car loan payments and could cause credit issues. Additionally, they advise against using cards from large banks due to stricter risk controls.
Similar experiences also indicate that fund flows need to be overnighted; a more advanced approach is to trade through different bank cards, immediately buy financial products with the earnings from selling cryptocurrencies, and then withdraw.
The crackdown will only become stricter.
However, regardless of how merchants and players try to evade, constrained by the gray identity of virtual currencies and the inextricable links to illegal funds, the card-freezing trend may just be the beginning.
Insiders close to the central bank told Tencent News (Qianwang) that the current regulatory approach remains 'everything must be handled according to the notices from the seven ministries.' In 2017, the Central Bank and seven ministries announced that the exchange of 'virtual currencies' among themselves is strictly prohibited, and buying, selling, or acting as a central counterparty for the trading of tokens or 'virtual currencies' is not allowed, nor is it permitted to provide pricing, information intermediary services, etc., for tokens or 'virtual currencies.'
The crackdown on the funding chain of cross-border gambling has remained under high pressure. Recently, the Deputy Governor of the Central Bank, Fan Yifei, pointed out that severing the funding chain of cross-border gambling is an important task in the decisive battle to prevent and resolve major financial risks. We must be highly vigilant, accurately grasp the difficulties and challenges faced in the financial supervision of cross-border gambling governance, continue to strengthen investigation and research, thoroughly understand the methods of fund flow and criminal acts in cross-border gambling, accurately grasp the actual situation of the gambling funding chain, and timely and effectively adjust prevention and control strategies and tactics, targeting the issues and effectively blocking them.
FYF emphasizes the need to strengthen overall coordination, ensure information sharing, and fully mobilize the power of grassroots branches. At the same time, it reinforces the main responsibility and continues to follow the principle of 'who opens the account (card) is responsible,' 'who's user (merchant) is responsible,' 'who's cooperative customer is responsible,' and seriously hold accountable licensed payment service entities. Additionally, it aims to strengthen risk prevention work such as customer identity verification, large and suspicious transaction reporting, and account cash withdrawal identity verification.
Relevant officials from the Foreign Exchange Bureau also stated that the current situation of cracking down on cross-border gambling remains very severe and complex. They will maintain a high-pressure crackdown on the illegal transfer of funds related to cross-border gambling, cooperate with public security agencies, and continue to severely crack down on underground banks, resolutely sever illegal exchanges and circulation channels for gambling-related funds, and legally investigate banks and payment institutions that provide payment and settlement services for illegal cross-border gambling funds.
Under the high-pressure situation, the shadow hanging over cryptocurrency traders is hard to disperse. An insider predicts that players involved in cryptocurrency trading may experience their first card freeze within the next one to two years.
The key point is coming:
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