- China arrested more than 1,100 suspects on charges of money laundering using cryptocurrency.
- Criminal clients paid up to 5% commission for conversion of dirty money into crypto, it said.
- The country banned financial institutions from offering crypto services about a month ago.
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Police in China arrested more than 1,100 people suspected of using cryptocurrencies to launder money acquired through telecommunication scams, the country's Ministry of Public Security said on its official WeChat account.
Its investigators have stamped out over 170 criminal gangs to date in an operation to crack down on telecom fraud, the ministry said Wednesday.
The suspected "coin farmers" converted the proceeds of illegal activity into cryptocurrencies on trading platforms and charged their criminal clients commissions of between 1.5% to 5% for the service, the ministry said. "The high illegal income attracts a large number of people to participate, causing serious social harm," it said in its posted statement.
Investigators are currently looking into money-laundering activity across 23 provinces and regions in China, including Beijing, Hebei, Shanxi, and Liaoning, according to the ministry.
The arrests came about a month after Chinese authorities banned the country's financial institutions from involvement in crypto-related payment services. The National Internet Finance Association of China, China Banking Association, and the Payment and Clearing Association of China warned investors that digital assets are not supported by real value.
The Payment and Clearing Association of China said Wednesday that crimes involving digital currencies have been escalating as their anonymity facilitates convenient cross-border money laundering, Reuters reported.
China's clampdown is reflected in the closure of at least 12 crypto-influencer accounts on Weibo this week, with the social-media platform citing violations of "relevant laws and regulations."
The country's ban on crypto transactions prompted a sharp sell-off across the digital asset market, sending bitcoin tumbling as low as $30,000 last month. Bitcoin was last trading 21% higher from that level at around $36,490 on Thursday.
Some experts in the crypto industry think the move won't hurt prices over the long-term.
"China has played this game before where they have banned crypto and brought it back," said Steve Ehrlich, CEO and co-founder of crypto-trading platform Voyager Digital, adding that a focus on its own digital currency may have been the motive behind the ban.
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