Despite Mainland China’s stringent restrictions on cryptocurrencies, crypto investment scams continue to surface. Recent developments in Shaanxi province highlight the persistent issue.

Crypto Fraud Uncovered in Shaanxi

On July 16, a resident named Wang filed a complaint with local police in Shaanxi province after being defrauded of 410,000 Chinese yuan ($56,800). Wang was lured into investing in cryptocurrency through an online application by individuals claiming to exploit a system loophole for guaranteed profits.

Following Wang’s complaint, the Criminal Investigation Bureau launched an immediate investigation. By July 23, the police had arrested two suspects, Zhai and Li, in Zhengzhou City, Henan Province. Two additional suspects, Wang and Li, were apprehended in Kaifeng City on July 25. All four suspects are now detained on fraud charges as the investigation continues.

China’s Ongoing Crackdown on Crypto

China is one of the world’s most restrictive countries regarding cryptocurrency, having enforced multiple bans on various crypto activities, including trading and mining. The latest Bitcoin ban in 2021 aimed to halt virtually all cryptocurrency transactions within the country.

Despite these restrictions, Chinese law still recognizes cryptocurrency as virtual property protected by law, offering some degree of protection to local crypto investors.

Recent Crypto-Related Enforcement Actions

In December 2023, the Chinese State Administration of Foreign Exchange dismantled an underground bank involved in illegal crypto exchange services. The operation, which spanned 17 provinces and involved over 1,000 bank accounts, moved 15.8 billion yuan ($2.2 billion) to purchase crypto on overseas exchanges.

While China’s strict regulations aim to curb cryptocurrency activities, scams and illegal operations persist. Recent arrests in Shaanxi province underscore the ongoing challenges law enforcement faces in combating crypto fraud.