11 nabbed over money scam using digital currency

Police in Xinmi in Central China's Henan province have detained 11 suspects after cracking down on the country's first money laundering case using digital currency.

"The crackdown has opened a new battlefield to fight against money laundering in the country," said Xinmi police in their official WeChat account on Wednesday.

Local police immediately launched further investigation when they were reported by a local resident surnamed Qu who believed he was being defrauded with more than 200,000 yuan ($31,496) earlier this year.

Qu was told in a mysterious phone call that there was a quality problem with the goods Qu bought online and Qu was ready to be compensated with the money at three times the price.

Qu then was asked by the call to transfer the money to a designated account to verify Qu's identity.

Qu sought police help after he suspected he has been deceived.

After a thorough investigation, police found Qu's money had been sent to a designated electronic wallet. However, the transaction mode of the e-wallet is different from the previous online payments, police said.

Police officers then visited local commercial banks, financial institutions and third-party payment companies to determine the users of the e-wallet.

With the help and guidance from the anti-fraud center of Zhengzhou City Public Security Bureau in the provincial capital, police found out that the funds in the e-wallet belong to digital currency. A woman surnamed Lin, 26, a resident in Fuzhou, Fujian province, was quickly targeted to be the suspect, police said.

A special task force was immediately sent to Fuzhou and detained 11 suspects, including Lin, there.

After a sudden trial, the 11-person gang was investigated to help uncover overseas fraud gangs and how they launder money through digital currency, police said.

The case is still under investigation, said police.

Mu Changchun, director-general of the People's Bank of China's Digital Currency Institute, said current payment tools, including bank cards, WeChat and Alipay, are all linked to bank accounts, and such accounts can't support anonymity because the names attached to them are verified. 

However, "digital currency is loosely connected to bank accounts, so a small amount of anonymity is possible," Mu said at a recent economic conference.

If digital renminbi were to offer a high degree of anonymity, criminals could use it as a tool to conduct illegal transactions related to pornography, gambling and drugs, he said.

Therefore, Mu said digital renminbi is designed to offer a "small amount of anonymity and a large amount of traceability" to help reassure users.

If online or phone fraud using digital renminbi occurs, it may be easier for victims of fraud to recover their money, he added.

Insiders said using digital currency doesn't eliminate the risk of falling victim to similar financial crimes. Indeed, the central bank has said crimes involving digital currency have caused economic losses valued at millions of yuan in recent years.

The total amount of digital renminbi transactions has now reached about 62 billion yuan, and about 14 million people have enabled e-wallets in the country. In addition, about 1.6 million business stores have allowed customers to pay for things such as public utility bills, catering services, transportation, retail purchases and government services using their e-wallets. 

Digital renminbi is the legal digital currency issued by the Central Bank of China, referred to as DC/EP — "digital currency/electronic payment". It is backed by a national credit guarantee and enjoys the same legal status as physical renminbi.