China Intensifies Crackdown on Blockchain and Metaverse Misuse Amid Rising Cybercrime

The Supreme People’s Procuratorate of China has declared its intent to intensify efforts against individuals exploiting blockchain and metaverse technologies for illegal purposes. During a press conference on February 23, spokesperson Li Xuehui highlighted a surge in blockchain and metaverse-related cybercrimes, pointing out that cryptocurrency laundering has emerged as a prominent method for transferring illegal funds. Zhang Xiaojin, who leads the Fourth Procuratorate, warned of deceptive “low risk, high return” investment schemes that have infiltrated the local cryptocurrency market, advising the public and digital asset stakeholders to stay vigilant against evolving fraudulent tactics, including the “pig butchering” scam. This scam involves gaining the trust of a victim to invest in a fraudulent digital asset project, only for the perpetrators to vanish with the invested funds. In one instance, U.S. authorities recovered over $9 million in Tether’s USDT stablecoin linked to such a scheme.

In 2023, Chinese law enforcement agencies successfully prosecuted over 42,000 individuals for their involvement in online fraud and cryptocurrency scams. Moving forward, the prosecutorial bodies are set to align their efforts with the directives of the 20th National Congress of the Communist Party of China, aiming to elevate the internet legal framework and ensure a healthier online environment through robust judicial support.

This announcement is part of China’s broader initiative to combat illicit activities associated with blockchain technology, amidst a backdrop of rising crypto crimes in Hong Kong, where incidents have tripled since 2021 according to crypto.news. Despite this, Hong Kong is advancing crypto-friendly policies to regulate its digital asset market and safeguard investors, promoting innovation while preventing malpractices. The region is moving towards a regulated environment, having introduced a licensing system for crypto businesses and considering the approval of spot Bitcoin ETFs for trading on local exchanges, a step forward following the U.S. SEC’s approval of 11 issuers. This contrasts with mainland China’s stance, where crypto trading and mining have been prohibited since 2021, although progress continues in the areas of Central Bank Digital Currencies (CBDCs) and web3 regulation.

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