Crypto Emerges as Key Tool in China’s Money Laundering Networks: Report

China’s long-running campaign to restrict capital flight is being undercut by its own criminal networks, which have increasingly turned to Bitcoin and other digital assets to move money across borders, according to new research.

Key Takeaways:

• Chinese money laundering networks are increasingly using Bitcoin and USDT to bypass strict capital controls.
• The same networks now serve Western criminal groups, including the fentanyl supply chain.
• Researchers warn that crypto-enabled laundering has become so globalized that no single jurisdiction can tackle the problem alone.

A paper published this month by Kathryn Westmore, a senior research fellow at the Centre for Finance and Security at the Royal United Services Institute, argues that cryptocurrencies have become a central pillar of China’s underground financial system.

Chinese Laundering Networks Turn to Crypto to Evade Capital Controls

Westmore said Chinese Money Laundering Organisations (CMLOs) are now routinely using virtual assets as conduits for illicit cash.

“Increasingly, [CMLOs] are incorporating cryptocurrencies within their operations, providing criminals with virtual assets, such as Bitcoin, or stablecoins, such as Tether USDT, in return for their dirty cash,” she wrote.

These digital assets then serve as a tool for individuals to quietly shift wealth offshore, bypassing strict capital controls that limit the movement of funds out of the country.

The shift comes amid a broader surge in crypto-related crime. Investor losses surpassed $2.3 billion in 2025, while pig-butchering scams drained $4 billion from victims in 2024, according to Chainalysis.

Westmore’s research adds another dimension to that landscape, showing that Chinese laundering groups have also become crucial financial intermediaries for Western criminal operations, including the fentanyl supply chain.

The report describes how drug proceeds collected in the United States are converted into Bitcoin or USDT, then routed to offshore accounts belonging to wealthy Chinese clients seeking discreet channels to move funds abroad.

The use of crypto extends beyond laundering services. Many Chinese sellers of fentanyl precursor chemicals now accept Bitcoin and USDT directly, effectively turning digital assets into settlement infrastructure for the synthetic opioid trade.

Blockchain analytics firm Elliptic has corroborated these claims, documenting onchain payments to China-based chemical suppliers tied to global fentanyl distribution networks.

With crypto rails woven deeply into these transnational laundering systems, Westmore warns that the problem is too vast for any single government to handle.

Europol Busts Ring Behind 49 Million Fake Accounts Tied to Crypto

In October, Europol dismantled a sophisticated cybercrime syndicate accused of creating more than 49 million fake online accounts, including fraudulent profiles linked to major cryptocurrency platforms.

The operation, codenamed “SIMCARTEL,” uncovered a sophisticated SIM farm-for-hire network that sold temporary mobile numbers used to bypass two-factor authentication, allowing criminals to mass-produce fake identities and commit large-scale financial fraud.

According to Europol, the syndicate’s infrastructure supported account creation for a range of online services, from e-commerce sites to digital banks and crypto exchanges.

These fake accounts were then used to launder illicit funds, run phishing campaigns, and facilitate smishing scams targeting European users.

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