Chinese Court Sentences Gang for Money Laundering Using Digital Yuan, Report Reveals

A Chinese court sentenced three gang members to prison for laundering 200,000 yuan using digital yuan, emphasizing the tightly controlled "controllable anonymity" of the Chinese CBDC.

China Enforces Strict Control Over Digital Yuan: Gang Sentenced for Laundering $27,580 Using CBDC

The "controllable anonymity" of the Chinese CBDC appears to be extremely tightly controlled.

According to the local press (via Cointelegraph), a court in China has sentenced members of a "gang" to prison and the payment of penalties for money laundering using the yuan central bank digital currency.

The People's Procuratorate of Yuecheng District, Shaoxing City, Zhejiang Province, sentenced three individuals to prison terms ranging from seven to 16 months for their money laundering activities. The trial's date was not specified.

The familial names were the sole means of identifying the gang members. In mid-September, the Chinese business website Mpaypass reported that they laundered 200,000 Chinese yuan ($27,580) in digital form over four days in Shaoxing. A fourth individual was apprehended; however, their fate was not disclosed.

Yuan, who had arrived in Shaoxing in an abortive endeavor to secure employment, observed an advertisement in his hotel offering a 0.8% commission to individuals who could cash out digital yuan at local merchants. After conducting numerous solo operations, he enlisted the help of his girlfriend, Zhang, and their mutual acquaintance, Kuo.

Chinese Gang Exploited Digital Yuan's Anonymity for Money Laundering: Merchants Received Commissions for Currency Conversion

The gang provided merchants in Shaoxing, Jinhua, Hangzhou, Jiaxing, and other locations with a 1%–1.5% commission in exchange for receiving digital yuan from their "superior" and converting it into currency. They were created with super superior "overseas niche chat tools." Zhang and Kuo were compensated with a 0.5% commission. The publication stated:

“Digital RMB [yuan] payment transactions are highly private, and overseas fraud gangs take advantage of this feature.”

Mpaypass continued, "The digital yuan is not accepted by a significant number of stores." Public security organizations promptly apprehended the gang members after receiving a report of abnormal digital yuan transactions among merchants.

According to current and former officials of the People's Bank of China, the digital yuan provides "controllable anonymity," essential for crime prevention. The press report also employed that phrase.

Digital Yuan Fraud Cases Rare: Shanghai Incident Highlights Security Measures and Legal Consequences

Fraudulent activities employing the digital yuan are exceedingly uncommon. In January, the website Cnstock, which identifies itself as “China’s capital market legal information disclosure platform,” reported on a comparable incident in Shanghai in May 2023. It was characterized as the first of its kind in the city.

In the Shanghai case, eight individuals, including merchants, were found guilty and sentenced to prison terms ranging from four to 54 months and penalties. They laundered $1.379 million, some of which was derived from "telecommunications network fraud."

The implementation of that scheme was contingent upon the capacity to establish digital yuan accounts solely using phone numbers. The bank personnel reported the illicit activities, which were subsequently discovered.

Photo: Microsoft Bing