OTC cryptocurrency traders under increased scrutiny by Chinese authorities

OTC cryptocurrency traders under increased scrutiny by Chinese authorities

A prominent member of the Chinese crypto community is being held by the police as part of the investigations.

Chinese authorities have been ramping up efforts to curb illicit economic activities. To speed up its investigations, the country’s law enforcement is now reportedly detaining over-the-counter (OTC) cryptocurrency traders.

One of the most recent crypto OTC trader that was reportedly detained by Hangzhou city police is Zhao Dong, according to Coindesk. Mr. Zhao is a well-known OTC trader and is the co-founder of RenrenBit, a Chinese cryptocurrency lending platform.

A rumor that the police took Zhao away first surfaced on WeChat on Thursday. A screen capture of his detention circulated on the social media platform until it was eventually reported by the local news.

RenrenBit said in a statement that even though Zhao invested in the OTC team, he wasn’t involved in its daily operations and has only recently returned to China from Japan last month. The company also explained that Zhao is “actively” assisting the police in their anti-money laundering and anti-fraud investigations.

Aside from Zhao, there have been traders that were also questioned by the police. A RenrenBit representative revealed on Weibo that the whole team of an unnamed OTC trading desk in Beijing has been taken away by police in June. However, the team members were likely only brought in for questioning as no arrest was made.

China has banned crypto exchanges from making trades between the Chinese yuan and cryptocurrency since 2017. Due to this restriction, traders turned to OTC platforms as they basically enable peer-to-peer trading by linking crypto buyers and sellers.

An unnamed source confirmed to Coindesk that Zhao is being held by authorities. However, the source added that his detention is not an isolated case but is just part of their systemic effort.

The unnamed source also confirmed that Chinese authorities in the provinces are increasing their scrutiny on cryptocurrency OTC desks since June. They have invited more than one OTC desk for questioning in connection with their investigations on money laundering.

Aside from being a member of the Chinese crypto community since 2013, Zhao is also one of the largest OTC traders in the country. Naturally, his detention by the police sparked fear among other OTC desks.

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