When the Xinmi police cracked down on the first-ever money laundering racket using China’s CBDC, the Chinese government had just begun to celebrate the nation’s digital Yuan as a secure and centralized digital payment method. The Xinmi Public Security Bureau, in collaboration with the Zhengzhou Public Security Bureau’s Anti-fraud Center, arrested 11 suspects in Fujian Province for illegally using digital Yuan to launder money. The authorities also revealed that the gang members were using China’s CBDC to launder money for an overseas fraud group hiding in Cambodia.
CBDC Scam in China Via Telecommunications
The CBDC scam was carried out through the use of a telecommunications network in Xinmi City. Victims of the fraud would receive random phone calls about their faulty online purchase, referring to quality issues, and the scammer would offer to compensate the buyer for the error at three times the product’s price.
The scammers would request verification from the victims, which included multiple transfers via digital yuan. According to local media, the Criminal Investigation Brigade of Xinmi City’s Public Security Bureau discovered that multiple payments were being transferred into a specific electronic wallet, but the wallet’s transaction mode was different from the previous online payment. The alleged perpetrators are currently being held by the Xinmi City Public Security Bureau for criminal investigation.
China’s Digital Yuan is not immune to illegal financial transactions.
According to China’s digital renminbi experts, the “controllable anonymity” feature in China’s CBDC ensures “reasonable anonymous transactions” as well as personal information protection. However, the primary purpose of digital yuan has been to “prevent, control, and combat money laundering, terrorist financing, tax evasion, and other illegal and criminal activities, as well as to maintain financial security.”
However, the digital renminbi’s inability to eliminate financial crimes that fall into the category of former crimes committed with cryptocurrencies has raised significant concerns about the use of China’s CBDC. Authorities have informed local media that the central bank has discovered that several gray and black industries have used the digital renminbi for illegal activities, causing CBDC losses in the millions of dollars.