China’s Foreign Exchange Administration warns against foreign currency exchange using virtual currencies

Warning against illegal foreign currency exchange using virtual currency

China’s State Administration of Foreign Exchange warned on the 24th that “purchasing crypto assets (virtual currencies) and exchanging them for foreign fiat currencies is illegal.”

The bureau appears to be citing a money laundering case involving more than $2 billion that occurred in 2022. This incident was a large-scale investigation by the police of an underground banking scandal involving a total of approximately 317 billion yen (15.8 billion yuan), and the incident involved the use of virtual currency.

More than 1,000 accounts related to one individual had a total transaction amount of more than 40 billion yen (2 billion yuan), and people who were studying abroad or making multiple short-term trips to the country sent money into these accounts.

The Public Security Bureau investigated the flow of funds and found that the owners of these accounts specialize in illegally buying and selling virtual currencies, and exchange large amounts of funds into tokens such as the stablecoin USDT through overseas virtual currency trading platforms. It is said that he was helping.

It appears that they were providing illegal currency exchange services through virtual currency. The company is also said to have done business with underground banks in China.

Qingdao police seized approximately 40 million yen (2 million yuan) worth of virtual currencies, including USDT and Litecoin (LTC). It also transferred the case to the prosecutor’s office for prosecution.

An inspector from the Qingdao branch of the Foreign Exchange Administration Bureau explained as follows:

In addition, the Deputy Director of the Inspection Department of the Foreign Exchange Administration Bureau stated that the government will continue to strictly control underground banking and other illegal crimes and promote improvements in the level of foreign exchange services.

In 2021, China will tighten its ban on virtual currency trading and mining. In October of this year, the Governor of the People’s Bank of China said that the country would “thoroughly crack down on virtual currency transactions” as part of illegal financing.

connection: Governor of the People’s Bank of China “Thoroughly crack down on virtual currency transactions” mentioned in the National People’s Congress announcement

Web3 without virtual currency

China places importance on the stability of the Chinese yuan and the development of a digital yuan, and while it prohibits the direct use of virtual currencies such as Bitcoin (BTC), there are also glimpses of moves to expand into the Web3 area.

In recent developments, China’s Ministry of Industry and Information Technology announced on the 19th that it will promote the development of NFTs (non-fungible tokens) and decentralized apps (dApps). He also said that he would create a strategy document to develop Web3 and clarify the path forward.

connection: China to promote development of NFTs and dApps Administrative agencies express intention to develop Web3

In addition, China is actively developing and testing the digital renminbi, a central bank digital currency (CBDC), and in October, PetroChina International conducted its first crude oil transaction using the digital yuan.

connection: First successful crude oil transaction using digital renminbi; de-dollarization progresses

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