- December 30, 2023
- Posted by: [email protected]
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Chinese authorities have issued a firm directive to escalate efforts to curb the use of cryptocurrencies, specifically emphasizing their involvement in illegal foreign exchange trading. This move is part of an ongoing initiative to mitigate financial risks and exert greater control over the cryptocurrency landscape.
The Supreme People’s Procuratorate (SPP) and the State Administration of Foreign Exchange (SAFE) issued a joint statement on Wednesday instructing prosecutors and forex regulators to increase the supervision of foreign exchange activity. Of particular concern is the use of Tether (USDT), a stablecoin pegged to the US dollar, as an intermediary in trading yuan with other currencies.
The directive urges local branches to enhance coordination and emphasizes the necessity to lawfully punish fraudulent foreign exchange purchases, illegal transactions, and other related activities. The overarching goal is to handle each case effectively, thereby preventing and resolving financial risks to uphold national financial security.
The statement underscores the illegality of converting yuan to cryptocurrency and vice versa within China, explicitly mentioning the use of cryptocurrencies as a medium for such transactions. Additionally, individuals providing technical support, such as building and maintaining websites, are considered “accomplices” by the authorities.
The prosecutor’s office highlighted eight “typical cases of illegal foreign exchange crime,” with two involving the use of Tether as an intermediary. The cases serve as a basis for the call for stricter regulation.
One highlighted case from 2019 involved a crypto trader who received cash from a Chinese gambling syndicate in Dubai, converted it into yuan via Tether, and realized profits. Another case featured Zhao Dong, the founder of RenrenBit, who used USDT to facilitate crypto and local currency trading, resulting in a seven-year jail term and a substantial fine.
This warning follows more than two years after China imposed a comprehensive ban on cryptocurrency activities, demonstrating a consistent regulatory stance aimed at maintaining financial control and preventing illicit activities.
Despite regulatory efforts, mainland China remains a significant cryptocurrency market with the largest transaction turnover in East Asia. Cryptocurrencies, particularly stablecoins like Tether, are still favored by underground traders for circumventing regulatory restrictions and engaging in cross-border transactions.
Recent law enforcement actions, such as the disclosure of a 15.8 billion yuan money laundering case in Qingdao, emphasize the authorities’ commitment to cracking down on illegal forex trading involving cryptocurrencies. The warning serves as a testament to China’s continued scrutiny of cryptocurrency transactions, signaling ongoing efforts to regulate the market.
