China tightens crackdown on foreign currency exchanges such as virtual currency Tether (USDT)

Preventing illegal foreign currency exchange

On the 27th, China’s Supreme People’s Procuratorate and the State Administration of Foreign Exchange issued a joint statement warning about new illegal foreign currency exchange practices. It listed several cases of exposure, including one involving the use of the stablecoin USDT.

Both authorities stated:

It is also illegal to use crypto assets (virtual currency) to exchange renminbi or foreign currencies, and individuals who are not directly involved in transactions but provide technical support such as building websites for transactions may also be considered “accomplices.” I warned you that you would see it.

On the 24th, the Bureau of Foreign Exchange issued a statement stating that the act of exchanging virtual currency for foreign legal currency is illegal. He was referring to a case in which 40 million yen worth of virtual currencies, including USDT and Litecoin (LTC), were seized from illegal traders.

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

Case study using stablecoin USDT

One of the cases cited by authorities was one that provided dirham and yuan exchange and payment services in the United Arab Emirates (UAE) and China.

The criminal group received cash in dirhams, the local legal currency, in Dubai, UAE, and used the dirhams to purchase the US dollar-denominated stablecoin USDT. Furthermore, it appears that they were making profits of more than 2% by selling USDT against the renminbi through gangs in mainland China.

The group is said to have exchanged more than 870 million yen (43.85 million yuan) between March and April 2019, earning a total profit of more than 17 million yen (870,000 yuan).

Members of the group were subsequently indicted, and the leader was sentenced to 11 years in prison and a fine of approximately 390 million yen (20 million yuan).

Prosecutors examined mobile phone chat records and bank account transaction records. They also examined seized computers, mobile phones and other electronic data carriers to determine the addresses of virtual currency wallets and their transaction records.

He also added that for most cryptocurrencies, it is possible to examine transaction records through public data once the wallet address is known.

The culprits “used the characteristics of virtual currency to evade foreign exchange monitoring by the Chinese government,” and they should be held accountable for their illegal operations.

People avoiding strict regulations

In 2021, China has tightened its ban on virtual currency trading and mining, and in October of this year, the Governor of the People’s Bank of China said that it would “thoroughly crack down on virtual currency trading” as part of illegal finance. .

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

On the other hand, there are still people who trade around regulations, and the 2023 Global Cryptocurrency Adoption Index by Chainalysis, a blockchain analysis company, ranks China as the country where cryptocurrencies are popular at the grassroots level. was ranked 11th.

connection: “Country that uses virtual currency on a daily basis” India ranks first in Chainalysis 23rd year ranking

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