Police Freeze Chinese Crypto OTC Traders’ Accounts; Digital Assets Tied to Laundered Money


Chinese Police freeze crypto over the counter traders (OTC) accounts to investigate a possible incident of money laundering stains on some of the digital assets on exchanges. The abrupt halt in China’s biggest fiat on- and off- ramp gives sets in surveillance by the relevant law enforcement officers with locked users’ accounts needing an “approval of innocence” by the government before getting back your funds.

Chinese Police launch investigation on ‘tainted accounts’

A blog post on Weibo by one of the top OTC desk managers in China, Sun Xiaoxiao, revealed that China’s police in Guangdong province froze thousands of crypto OTC traders’ accounts starting last Thursday.

According to Sun the police froze users’ funds which they found to be “tainted” by money laundering activities. The police maintain the act to freeze funds is to investigate further on the possible source of the tainted crypto – no trader is being accused of any wrongdoing.

The speculations however are rising on what could be the possible reasons the OTC traders accounts have been frozen. Sun reasoned that the police may be targeting crimes involving telecommunication frauds, Ponzi schemes and casino businesses which use these trading desks to launder ‘dirty money.’ Sun’s blog post read,

“Now there are also OTC merchants who had their bank accounts frozen because of questions over the source of the coins they bought. That means, besides ‘dirty money,’ there are also ‘dirty coins‘ circulating.”

The police are yet to release any statement on the possible reasons why they froze the accounts.

An unusual act from the authorities

Money laundering on blockchains is quite common as the anonymity on cryptocurrencies give users some masked protection in laundering their money. In China, money laundering on OTC desks has been growing as the dirty money is transformed into Bitcoin (BTC) and other cryptocurrencies.

Through market activities, some of these cryptocurrencies bought by tainted cash do find their way to innocent users’ accounts. Blockchain tracking tools such Chainalysis have made it easier for the police to trace such cash on public blockchains. The Chinese police are heavily invested in tracking tools in order to track down the money laundering activities, and innocent accounts do get caught in the middle.

However, in the past the police never froze innocent OTC traders’ funds due to tainted coins. Sun said this was a rather strange move by the police stating its “unusual for users to have their accounts frozen over tainted cryptocurrencies.”

For users to regain access to their accounts, they will need to prove to the authorities that their coins are “clean” by proving their source.

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