These addresses also received $2 billion (about Rs 14,820 crore) in cryptocurrencies from illegal sources, making China a major player in digital-currency-related crime. The report analyzes cryptocurrency activity in China amid government action.
However, transaction volumes with illegal addresses in China have fallen significantly in absolute value and relative to other countries over a two-year period, Chainalysis said. The big reason is the absence of large-scale Ponzi schemes such as the 2019 scam involving crypto wallet and exchange PlusToken that originated in China, it noted.
The PlusToken scam caused an estimated $3 billion (approximately Rs 22,230 crore) to 4 billion dollars (approximately Rs 29,650 crore) loss to users and customers. The Chainalysis report states that the majority of China’s illegal fund movement in crypto is related to scams, although this has also been on the decline.
“This is most likely due to both the awareness raised by PlusToken as well as the crackdown in the sector,” Gurvais Grieg, Chief Technology Officer, Global Public Sectors, Chainalysis, said in an email to Reuters.
The report also cited the smuggling of fentanyl out of China, a very potent narcotic pain reliever prescribed for severe aches or pains after surgery. Chainalysis described China as the center of the global fentanyl trade, with many Chinese manufacturers using cryptocurrencies to conduct transactions.
Chainalysis said that money laundering is another notable form of crypto-based crime that is disproportionately carried out in China. Most cryptocurrency-based money laundering involves mainstream digital currency exchanges, often through over-the-counter desks whose businesses are built on top of these platforms.
Chainalysis noted that China appears to be taking action against businesses and individuals facilitating this activity. It cited Zhao Dong, the founder of several Chinese OTC businesses, who was indicted on money laundering charges in May after being arrested last year.