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Chinese Police Arrest 1,100 People for Money Laundering With Cryptocurrencies

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Authorities in China escalated their campaign against cryptocurrencies, arresting more than 1,100 people suspected of using the digital assets to launder ill-gotten funds and ordering mines to shut down in one of its western provinces.

In a swoop spanning 23 provinces, regions and cities, Chinese police on Wednesday rounded up more than 170 criminal groups that engaged in cryptocurrency trading in order to launder money obtained via telephone and online scams, the Ministry of Public Security said in a statement. The suspects repeatedly converted the assets from one cryptocurrency to another to cover their tracks, it said.

The illegal activities “caused serious social harm,” the ministry added.

The arrests came after a powerful Chinese superregulator last month pledged to “crack down on bitcoin mining and trading behavior,” as part of broader efforts to guard against financial risk and reduce energy consumption in the country. Concerns of a regulatory clampdown contributed to a strong selloff in bitcoin and other cryptocurrencies.

Bitcoin is still struggling to rally out of its recent trading range. It traded near $36,755.77 Thursday, having been as high as $64,802 apiece in mid-April.

Many supporters of cryptocurrencies had dismissed China’s recent warnings as a reiteration of previous bans. But there are signs that Chinese authorities are now more serious about reining in crypto-related activities after months of volatile trading and mounting concerns about their carbon footprints.

“China always had a very strong stance against cryptocurrencies. Now they’re intensifying some of their narrative,” said

Naeem Aslam,

London-based chief market analyst at brokerage AvaTrade.

Multiple cryptocurrency mining platforms in recent weeks started blocking internet addresses in mainland China from accessing services.

On Thursday, internet searches for several major crypto exchanges including Binance, Huobi and OKEx turned up empty on

Baidu Inc.’s

popular search engine and Weibo, a Twitter-like microblogging service. The exchanges had been popular choices for people in mainland China to trade virtual currencies in what is known as the over-the-counter market. Several Weibo users known for posting about cryptocurrencies also had their accounts banned last week.

The high appetite for cryptocurrency mining, an energy-intensive process in which computers compete to solve complex mathematical puzzles to unlock fresh bitcoin, has run counter to Beijing’s energy objectives. President

Xi Jinping

is determined to recast China as a climate champion and has set ambitious goals to reduce coal use.

Regional governments have recently stepped up their campaigns against mining. In late May, authorities in the coal-rich region of Inner Mongolia published detailed draft rules against the business.

The government in the western province of Qinghai has also announced a ban on cryptocurrency mining, state-run news agency Xinhua Finance reported Thursday. It said authorities would investigate mining operations that ostensibly run as big data or supercomputing centers.

While China has moved to curb cryptocurrency miners, others are seeking to court them. El Salvador’s president,

Nayib Bukele,

said Wednesday that he instructed the nation’s state-owned geothermal electric company to put up a plan to offer facilities for bitcoin mining using cheap, renewable energy from the country’s volcanoes. The announcement came hours after the small Central American country became the first to make bitcoin legal tender.

Some of the pressure on bitcoin due to actions by China may be easing, said

Joel Kruger,

a strategist at cryptocurrency exchange LMAX Digital. The dispersal of cryptocurrency mining across more countries, leading to a decentralization from the current concentration in China, has boosted optimism, as has the prospect for greener energy sources than coal used by some Chinese miners.

“This is a positive in that it’s forcing mining to be more spread out, and it’s forcing the narrative to shift to more environmentally friendly ways of mining,” Mr. Kruger said.

Write to Elaine Yu at elaine.yu@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

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