China’s police are investigating a scam and a possible money laundering case involving e-CNY. Until now, the police have arrested eleven suspects who transferred CNY funds abroad.
Eleven people recently went to prison for committing a scam with digital yuan (e-CNY), China’s new official cryptocurrency. The police are still investigating the case, which allegedly involves money laundering activity.
The fraud occurred in Xinmi, a city in northern China, where someone called Qu bought a product from a digital store. After the purchase, the business told him that there was a problem with the item. For that reason, they promised that they would refund the money multiplied by three.
After the notice, they sent Qu 200 thousand yuan (CNY), equivalent to three times the value of that product, according to CoinGecko. The company made a transaction of around USD 31 thousand through various transfers from a digital yuan wallet.
The Authorities Consider the Transfers to Be a Case of Money Laundering
Those suspicious movements came to the attention of the Xinmi City Public Security Bureau. For that reason, they called the activity a possible money laundering. Everyone knows that the authorities have the right to examine the digital yuan wallets of its inhabitants. That situation indicates that that system that does not have any privacy.
Under international regulations against money laundering and terrorism financing, central bank digital currencies (CBDCs) cannot be completely anonymous. The director of the Digital Currency Research Institute of the People’s Bank of China, Mu Changchun, made that point when describing privacy related to the digital yuan.
Experts agree that the Chinese government created the digital yuan to control and monitor citizens. A report from Dovey Wan, an expert investor in the Asian market, attests to that information.
She said that the government has stated that it wants to use that tool to combat corruption in the territory. However, she believes that those financial surveillance capabilities are most likely going against citizens.
A Cryptocurrency Criminal Group Sent Its Money Out of China
Lin, the owner of the e-CNY wallet, is a 26-year-old woman who lives in Fuzhou, a city in eastern China. When the police found her, they arrested her with ten other suspicious people, bringing them to a surprise trial.
According to the China Criminal Investigation Center, the suspects transferred funds in yuan abroad, specifically to Cambodia, after the trial. For that reason, the agency cannot continue to investigate as it does not have any jurisdiction in that territory.
Unlike decentralized cryptocurrencies like Bitcoin (BTC) and Ether (ETH), the digital yuan allows the Chinese government to control the transactions of citizens. With their alleged efforts to fight money laundering and terrorism financing, they are affecting the privacy and security of the owners of those CBDC wallets.
The regulatory authorities of many countries have their sights on Bitcoin and other decentralized crypto assets as they associate them with illicit activities. For that reason, China decided to work on developing its new central bank digital currency.
By Alexander Salazar
