Crypto Becomes a Major Tool in China's Money Laundering Operations: New Findings

China's ongoing efforts to restrict capital flight are being undermined by its own criminal networks, which are increasingly utilizing Bitcoin and other cryptocurrencies to transfer money across borders, a new report reveals.

Key Takeaways:

Chinese money laundering networks are increasingly leveraging Bitcoin and USDT to circumvent strict capital controls.
These networks are now also servicing Western criminal organizations, including those involved in the fentanyl trade.
Researchers highlight that cryptocurrency-enabled money laundering has become so widespread that it requires a coordinated global response.

A recently released paper by Kathryn Westmore, a senior research fellow at the Centre for Finance and Security at the Royal United Services Institute, posits that cryptocurrencies are now integral to China's underground financial ecosystem.

Crypto Becomes a Major Tool in China's Money Laundering Operations: New Findings

Chinese Money Laundering Networks Use Crypto to Evade Capital Controls

Westmore notes that Chinese Money Laundering Organizations (CMLOs) are regularly incorporating virtual assets into their operations.

“Increasingly, [CMLOs] are using cryptocurrencies as channels for illicit cash, offering criminals access to virtual currencies like Bitcoin or stablecoins like Tether USDT in exchange for their illegal earnings,” she explained.

These digital currencies facilitate quiet offshore wealth transfers, allowing individuals to bypass stringent capital controls that restrict money movement out of China.

This increase in crypto use aligns with a more extensive rise in crypto-related crimes. In 2025, investor losses exceeded $2.3 billion, and scams involving “pig-butchering” took $4 billion from victims in 2024, according to Chainalysis.

Westmore’s findings reveal that Chinese laundering groups have also become essential financial intermediaries for Western criminal enterprises, particularly in the fentanyl supply chain.

The report illustrates how drug proceeds collected in the U.S. are converted into Bitcoin or USDT and then sent to offshore accounts owned by affluent Chinese clients seeking covert means to transfer funds abroad.

The application of cryptocurrencies extends beyond laundering. Many Chinese suppliers of fentanyl precursor chemicals now accept Bitcoin and USDT directly, essentially transforming digital assets into a settlement method for the synthetic opioid trade.

Blockchain analytics firm Elliptic has supported these insights by tracking on-chain payments to Chinese chemical suppliers associated with global fentanyl distribution networks.

With cryptocurrencies deeply embedded within these transnational laundering frameworks, Westmore cautions that the issue is too extensive for any single government to resolve independently.

Europol Uncovers Operations Behind 49 Million Fake Accounts Connected to Crypto

In October, Europol dismantled a sophisticated cybercrime network accused of creating over 49 million fraudulent online accounts, including those affiliated with major cryptocurrency platforms.

This operation, codenamed "SIMCARTEL," unearthed a complex SIM farm-for-hire network that sold temporary mobile numbers designed to circumvent two-factor authentication, enabling criminals to generate fake identities en masse and execute significant financial fraud.

According to Europol, the infrastructure of this syndicate supported the creation of accounts for various online services, ranging from e-commerce platforms to digital banks and cryptocurrency exchanges.

These fraudulent accounts were exploited to launder illicit funds, run phishing schemes, and execute smishing scams targeting European users.

With the increasing prevalence of cryptocurrencies in illegal financial activities, a collaborative global response is essential to combat the dual threats of money laundering and cybercrime.