Tether In Crosshair Amid China’s Crackdown On Illegal Forex Trading

The Chinese governmental authorities have decided to crackdown on the use of cryptocurrencies in illegal foreign exchange trading. On Wednesday, December 27, 2023, the Supreme People’s Procuratorate and State Administration of Foreign Exchange directed prosecutors and forex regulators to supervise foreign exchange activities stringently. The focus is on cases where the Tether (USDT) is used as an intermediary for trading yuan with other currencies.

Need For Regulating Crypto Forex Trading

According to a South Morning China Post report, local branches were asked to enhance coordination to “punish fraudulent foreign exchange purchases, illegal foreign exchange transactions, and other foreign exchange-related illegal and criminal activities lawfully.” The goal is to handle each case efficiently, preventing and resolving financial risks while maintaining national financial security.

The official statement declared the conversion of yuan to cryptocurrency and vice versa as illegal in China. Furthermore, individuals not directly engaged would also be considered accomplices if they provided technical support in running the sites. The forex regulator emphasized a persistent and tough clampdown on illicit cross-border financial activities.

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Illegal Forex Trading Cases In China Using Crypto

Furthermore, the prosecutor’s office highlighted eight “typical cases of illegal foreign exchange crime.” Two of these cases involved the use of the Tether stablecoin. One case from 2019 involved a crypto trader receiving over 22 million UAE dirhams (about $6 million) in cash from a Chinese gambling network in Dubai.

The trader in question used UAE dirhams to purchase Tether stablecoin. He then resold it in mainland China for yuan with gains of over 2%. Upon conviction, he was sentenced to seven years in jail and fined 2.3 million yuan (approximately $322,000),

Another case was recorded from 2018 to 2021, which involved the conversion of over 220 million yuan worth of foreign currency using Tether. The developer and maintainer of several Chinese payment websites linked to these transactions received a five-year prison sentence. In addition, a 200,000 yuan fine was imposed on him.

The foreign currency trading rules are strict in mainland China while crypto trading and mining are officially banned. However, cases of illicit foreign trades using crypto have still increased rapidly.

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