China has handed down prison sentences to five people involved in a crypto laundering scheme. They laundered over 1.18 billion yuan ($166 million) using the stablecoin Tether (USDT). This case was announced by the Beijing Municipal People’s Procuratorate at the 2025 Financial Street Forum.
The case is being described as one of China’s biggest crypto-related prosecutions to date. It underscores Beijing’s growing intolerance toward digital assets, even as nearby Hong Kong pushes to embrace them.
Each member of the group received between two and four years in prison after being found guilty of operating an underground money exchange disguised as a cryptocurrency trading business.
How the $166 million “bridge” worked
Prosecutors claims that the group, led by a man named Lin Jia, operated an illegal foreign exchange business from January to August 2023. Their clients would deposit Chinese yuan into domestic bank accounts, which the group then converted into USDT on various trading platforms.
Because stablecoins like Tether can move seamlessly across borders, the group used them to send money overseas — taking a cut on each transfer. Officials called the scheme a textbook example of how crypto can be used as a “bridge” for unregulated cross-border payments, something Beijing has vowed to stamp out.
High-tech tracing meets blockchain
Investigators used a mix of traditional financial analysis and blockchain forensics to crack the case. By matching timestamps between local bank transactions and crypto transfers, authorities were able to expose patterns inconsistent with the group’s story that they were “legitimate traders.”
This blend of data analytics and blockchain tracing is now being hailed as a model for future financial crime investigations involving crypto. All five defendants accepted their sentences without appeal.
China’s central bank warns stablecoins pose global risks
At the same forum, Pan Gongsheng, the governor of the People’s Bank of China (PBoC), issued a sharp warning against stablecoins, calling them a threat to global financial stability and national sovereignty. He argued that stablecoins amplify risks in the global system and make it harder to combat money laundering and terrorist financing.
Pan reiterated that the PBoC would uphold a “zero-tolerance” stance toward private digital currencies, even as the global stablecoin market has ballooned past $310 billion, led by USDT and USDC.
Hong Kong feels the chill
The crackdown is also sending shockwaves through Hong Kong’s Web3 sector, which has been trying to position itself as a regulated crypto hub.
Earlier this month, Ant Group and JD.com reportedly froze their plans to launch stablecoins after being told by regulators that currency issuance must remain under state control. The decision follows strong signals from Beijing that any private attempts to create or manage money — even digital versions — are off-limits.
Despite Hong Kong’s efforts, with 77 firms already showing interest in its upcoming stablecoin licensing regime, China’s stance could ultimately limit how far the city’s digital finance ambitions can go.
