Chinese Police Detain Team Behind Yuan-Backed CNHC Stablecoin: Report

Chinese police have reportedly arrested and detained some employees of Trust Reserve, the company behind the yuan-backed CNHC stablecoin.

According to a report from local media PANews, the Trust Reserve’s core team was apprehended at noon on May 29, and their family members have been notified.

Police Arrest CNHC Issuance Team

Representatives for PANews visited the company’s office in Pudong, Shanghai, and found a vacant workspace with a seal that read “Judicial Seizure, Strictly No Vandalism” at the door. The notice was signed on May 29.

While the reason for the arrest remains unclear, people familiar with the matter told the local news agency that Trust Reserve’s cross-border payment business might be the reason for the case.

Trust Reserve owns two stablecoins – an offshore Chinese yuan-backed asset (CNHC) and a Hong Kong dollar-backed token (HKDC). The stablecoin issuer recently secured $10 million for CNHC in a funding round led by KuCoin Ventures, the investment arm of Seychelles-based cryptocurrency exchange KuCoin.

Circle Ventures, the investment division of USDC stablecoin issuer Circle, and multinational investment firm IDG Capital also participated in the round.

CNHC, backed by permissionless layer 1 blockchain network Conflux, is pegged 1:1 with the offshore yuan (CNH), whose reserves are kept at a Hong Kong depository institution.

Fear and Uncertainty

News of the arrest comes amid unverified rumors of Chinese authorities allegedly arresting the Multichain project team. Multichain is a cross-chain router protocol with over $1 billion in assets locked in its contract.

In the past week, transactions on the protocol have been delayed and stuck with multiple offline cross-chain bridge pathways, including Polygon zxEVM, Kava, and zkSync. The team initially said the issue was from a backend upgrade, which is taking longer than expected. However, the narrative was later changed to problems stemming from uncontrollable events.

The Multichain team has failed to confirm or refute the ongoing rumors and has remained silent on social media platforms, including their Telegram group and Discord server.

On May 25, Multichain co-founder DJ Qian, who no longer works with the project, disclosed on Twitter that the current CEO, Zhaojun, was unavailable when asked to provide technical help for the ongoing issue.

The sudden disappearance of the Multichain and Trust Reserve teams may spark fear and uncertainty among their users, causing a panic sale of their products.