Gambling Rings Use Cryptocurrency to Transfer $145.5 Billion of Funds Outside China Every Year, Official Report Reveals

According to a senior official at the Ministry of Public Security, funds worth more than 1 trillion yuan ($145.5 billion) flow out of China into gambling activities each year.

Liao Jinrong, the director-general of the International Cooperation Department under the Ministry of Public Security, said that gangs operating illegal gambling activities used cryptocurrencies to collect and transfer funds, thus making it harder to trace original sources and adding greater challenges to investigations.

Online Gambling Undermines China’s Economy 

Speaking at an event on payment and clearing in Beijing on September 24, Liao stated that online gambling activities could undermine China’s economic security due to the potential collusion between “foreign powers” and gambling operators.

The development of internet technology has attracted Chinese nationals to online gambling hosted by international operators and frequently involves irregular fund transfers. Casinos and gambling are illegal in mainland China.

Liao stated that there are gaps and loopholes in the supervision of e-commerce platforms, merchants, third-party institutions, and payments service providers. He mentioned that the lack of strict checks and inspection on the opening of payment services at banks is a challenge.

Liao pinpointed the insufficient supervision of suspicious transactions and risk control by payment services providers. He stated that there is a collaboration between criminal organizations and payment industry practitioners since the online gambling casino business is so lucrative. Liao said:

“There are so many casinos overseas, and details of the assets of many domestic entrepreneurs, individuals and related parties would have been investigated thoroughly [by foreign operators conducting background checks]. This is very unsafe for us.” 

According to Liao, increasing the cost of opening payment accounts at non-institutional financial institutions, requiring account holders to use their real names, and identifying unusual transactions, are some of the measures which could improve China’s crackdown efforts on financial outflows sponsoring cross-border gambling.

Liao’s comments come at a time when Beijing has intensified efforts to stamp out fund outflows. In August, The State Administration of Foreign Engage (SAFE), China’s exchange regulator, stated that it would strengthen its supervisions of the foreign exchange market and the crackdown on crimes like cross-border gambling and underground banks.

This week, Zhu Min, the head of the National Institute of Financial Research at Tsinghua University, said that China requires to raise the cost of cross-border money flows to safeguard its financial markets from speculative capital. 

Chinese gamblers and high rollers are a vital source of revenue for casinos in the country. Macau, the world’s largest casino hub under China’s government administration, relies on tourism and gambling as its major source of revenue, and it is a famous and popular tourist destination for mainlanders. 

Fitch, a US credit rating agency, speculated that Macau’s gaming revenue would decline almost 80% in the third quarter of this year compared to the same period last year, because of travel restrictions between Hong Kong and mainland China to contain the spread of coronavirus.

China’s Stance on Cryptocurrencies

China has not always been friendly toward cryptocurrencies. Once the largest market for Bitcoin in the world, the country has already banned the trading of cryptocurrencies and made the IPOs (fundraisings in the sale of digital assets) illegal.

Just like other forms of online casinos, the country banned Bitcoin casinos. Bitcoin gambling is quite popular in the country because it is anonymous and helps online gamblers remain undetected. However, without Bitcoin exchanges operating in the country, traders have turned to foreign exchanges to conduct crypto transactions.

China’s Central Bank has been developing and testing its own national digital currency, and an official implementation may help fight online gambling, terrorist financing, tax evasion, money laundering, and other cybercrimes. However, currently, there is no official timetable for its launch.