Police in Shanghai, China, have shut down a company that issued two stablecoins, one of which is pegged to the Chinese Yuan, the CNHC currency. Last Monday, the most important leaders of the company were arrested (29).
In addition to the leaders, some employees were also eventually kidnapped by the authorities, who are investigating a possible crime of illegal money transfers.
In recent years, the team at Trust Reserve, formerly CNHC Group, had also created a Hong Kong Dollar stablecoin, HKDC. This means that at least two stablecoins are involved in the investigations.
Company that issued stablecoins in China suspected of carrying out an illegal scheme to send money between countries
China is a jurisdiction that is not very friendly to the cryptocurrency market, showing through public policy that it does not want financial technology circulating in the hands of its people.
In any case, the local market continues to move values and a company was active in the country to issue stablecoins backed by Yuan.
But according to information from TechFlow, the deal ended last Monday, when authorities arrived at the building and arrested the ringleaders. They were taken to the police station for clarification and are being investigated for possible crimes of sending money between countries without a record of operations.
According to local information, even if the company has issued stablecoins, the situation is not the main line investigated by the Chinese authorities. In addition, relatives of some of the employees received reports from the authorities about the investigation, showing that the case drew police attention to the crime.
It is worth remembering that China has created a digital version of its own currency, the digital yuan, and has encouraged the population to adhere to the technology.
Stablecoin risks continue to rise
It is worth remembering that the risk of having stablecoins in a portfolio surfaced in 2022, when the Earth ecosystem (LUNA) collapsed. At the time, the episode left TerraUSD (UST) devastated in a matter of days, leaving many who had versions of dollars in stablecoins at great loss.
Although the collapse of the UST received a lot of attention from authorities in South Korea, the case has spread around the world. The main risk of stablecoins, which still lingers in 2023, concerns the centralized companies that issue such versions of coins, which can run into problems and quickly collapse with investors’ money.
It’s not clear what China’s Trust Reserve’s plan is for handling the police investigation, but investors in the currency are keeping a close eye on the matter.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
