Cryptocurrencies are quietly becoming the backbone of China’s underground financial system — a system so large and sophisticated that experts warn no single government can combat it alone.
A new research paper reveals that Chinese laundering groups are now using Bitcoin and USDT not only to bypass domestic capital controls, but also to support Western criminal operations, including the fentanyl supply chain.

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Key Points at a Glance

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  Chinese laundering networks increasingly rely on Bitcoin and USDT to move capital offshore.

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  These same groups now serve Western drug and cybercrime operations.

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  Crypto payments are used in the fentanyl precursor chemical trade.

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  The global nature of these networks makes unilateral enforcement impossible.

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  Crypto-related crime remains high, with multi-billion-dollar losses in 2024–2025.

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Why Crypto Became Essential to China’s Underground Banking

According to the report by Kathryn Westmore, senior research fellow at the Centre for Finance and Security (Royal United Services Institute), Chinese Money Laundering Organisations (CMLOs) have dramatically expanded their use of digital assets.

These digital assets allow individuals — and criminal syndicates — to move money outside China without triggering the country’s strict capital flight restrictions.

Crypto functions as:

• a quiet highway for moving wealth abroad,

• a fast settlement layer for illicit transactions,

• and a bridge between Western criminal revenues and Chinese underground financial markets.

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From Drug Money to Digital Assets: The Fentanyl Link

One of the most alarming findings is that CMLOs now play a financial role in the fentanyl supply chain.

Here’s how the system works:

1. Drug proceeds from U.S. or European markets are collected in cash.

2. The money is converted into Bitcoin or USDT.

3. Those assets are transferred through offshore accounts managed by Chinese intermediaries.

4. The funds ultimately end up with wealthy Chinese clients trying to discreetly move money out of China.

At the same time, many Chinese suppliers of fentanyl precursors now accept direct crypto payments, transforming Bitcoin and USDT into de facto settlement tools for the global opioid trade.

Blockchain analytics company Elliptic has verified on-chain payments linked to chemical suppliers in China — a major confirmation of this trend.

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A Growing Threat Beyond Any Single Country’s Reach

Westmore stresses that the problem is now too globalized to be managed by one jurisdiction.
Crypto-enabled money laundering today spans:

• China

• Latin America

• the EU

• the United States

• Southeast Asia

• Middle Eastern financial hubs

Because transactions jump rapidly between exchanges, mixers, OTC brokers, and smart contracts, freezing or intercepting funds becomes extremely difficult.

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Europol’s Operation “SIMCARTEL”: 49 Million Fake Accounts

In one of 2025’s largest takedowns, Europol dismantled a major cybercrime operation responsible for generating over 49 million fake online accounts.

The busted network operated a massive SIM farm-for-hire, selling temporary mobile numbers used to bypass two-factor authentication (2FA). This allowed criminals to:

• create fake profiles on crypto exchanges,

• register fraudulent digital bank accounts,

• scale phishing campaigns,

• run smishing operations across Europe,

• and launder criminal proceeds through hard-to-trace online identities.

These “disposable identities” became crucial infrastructure for laundering crypto-linked funds.

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Conclusion — A New Era of Borderless Laundering

China’s crypto-driven laundering networks have evolved from internal capital-flight tools into global engines powering drug trafficking, cybercrime, and large-scale fraud.
With Bitcoin and USDT acting as universal currencies, these systems have become:

• faster,

• harder to detect,

• and nearly impossible to dismantle through domestic legislation alone.

The research makes one thing clear:
crypto is now a core component of international criminal finance — and global cooperation is the only viable response.