Alert: China Driving Crypto Crime From North Korea to Cartels – TRM

Cryptocurrency has transformed the global financial landscape, enabling fast, secure, and decentralized transactions. However, its benefits have also been exploited by criminal networks worldwide, with Chinese black market operations emerging as a central player in illicit crypto laundering schemes. Investigative findings point to an urgent need for coordinated international actions to counteract these operations and disrupt the networks underpinning major criminal enterprises.

## The Role of Chinese Black Market in Crypto Money Laundering

China’s underground financial networks play a pivotal role in facilitating crypto-based money laundering for global criminal entities. North Korean cybercriminals, drug cartels in Mexico, Russian mafias, and even phishing scammers reportedly rely on these networks to convert stolen digital assets into fiat currencies. Blockchain intelligence firm TRM Labs highlights that these operations are largely dominated by Chinese crime syndicates, known as triads, who expertly off-ramp illicit funds. This creates a robust financial system for criminals attempting to bypass traditional banking regulations.

Experts from TRM Labs argue that U.S. legislative efforts have largely failed to address the significance of these Chinese operations in the broader context of global crypto crime. Criminal groups exploit China’s permissive underground banking systems to launder billions of dollars annually. This not only finances illicit activities but also threatens the credibility and security of the global cryptocurrency ecosystem. From hackers funneling stolen Ethereum to cartels laundering stablecoins like USDT, these operations are seamlessly integrated into a wider spectrum of criminal activity.

## How Cryptocurrency Crimes Are Linked to Chinese Banking Networks

The complex relationship between crypto crimes and China’s clandestine banking systems cannot be overstated. A notable example involves North Korean hackers who executed a staggering $1.4 billion Ethereum hack in 2023. While the focus initially fell on the technical prowess of North Korea’s cybercriminals, further investigations revealed that third-party brokers in China were the ones converting the stolen Ethereum into Bitcoin before laundering the funds. Blockchain investigator Nick Carlsen noted that these intermediaries, predominantly Chinese money launderers, were crucial to transferring and dispersing the assets into fiat money.

Chinese financial operatives utilize underground mechanisms, such as informal money exchanges, to cater to both criminal enterprises and wealthy Chinese nationals looking to circumvent China’s strict banking policies. The process involves converting cryptocurrency into fiat for those willing to pay a premium to access international funds. These practices have allowed the free flow of illicit money across borders, supplying cash to fund criminal empires while evading regulatory scrutiny.

## U.S. Efforts and Challenges in Countering Crypto Laundering Networks

Efforts by U.S. authorities to combat crypto money laundering have remained fragmented, treating fentanyl smuggling, cybercrime, and crypto scams as separate challenges rather than addressing the role of China’s underground networks as their unifying thread. Former Treasury official Ari Redbord emphasizes the need for law enforcement to take a more integrated approach. He believes targeting China’s shadow banking sector could significantly reduce the scale of crypto-enabled crimes.

To illustrate the effectiveness of such an approach, recent reports suggest deploying aggressive on-chain maneuvers to disrupt illicit Chinese operations. This would involve using advanced blockchain analytics to trace stolen assets and enforce punitive actions against entities facilitating illegal transactions. However, critics caution that China’s sophisticated surveillance and tracking systems would make it difficult for U.S. efforts to succeed without broader international cooperation.

A potential solution endorsed by TRM Labs involves applying sanctions on nations serving as offshore safe havens for these laundering networks, such as Cambodia and Vietnam. By disrupting their operational ecosystems, the U.S. government could deliver a critical blow to the financial infrastructure of cartels and other criminal organizations relying on such services. Nevertheless, this requires a unified response from agencies like the FBI, DEA, and Treasury, which currently struggle with jurisdictional overlaps and insufficient collaboration.

## Moving Forward: Strengthening the Global Crypto Ecosystem

Cryptocurrency’s association with crime has long been a focus of controversy, but the larger issue lies in the traditional mechanisms facilitating these illegal activities. As blockchain technology advances, more sophisticated tools are being developed to monitor and trace the movement of digital assets across borders. Governments and private entities must work together to enforce stricter anti-money laundering measures targeting key players in global crime networks, such as Chinese black-market financial systems.

Ultimately, dismantling these networks will require a multi-pronged effort—leveraging blockchain analytics, diplomatic sanctions, and proactive law enforcement strategies to sever the ties between cryptocurrencies and criminal operations. With global coordination and enhanced technology, the crypto industry can continue to grow while mitigating its exploitation by illicit groups. The time to act is now, as the longer these networks persist, the greater the threats become to both the digital finance world and global economic security.