Chinese authorities are intensifying their efforts to regulate the use of cryptocurrencies in illegal foreign exchange (forex) trading. The crackdown specifically targets the misuse of stablecoins like Tether (USDT) in unlawful transactions. This article examines the recent joint statement issued by the Supreme People’s Procuratorate and the State Administration of Foreign Exchange (SAFE), highlighting China’s broader strategy to combat financial fraud and maintain stability in its forex market.
The statement from SPP and SAFE emphasized the need for close collaboration between local branches to punish and lawfully handle cases related to fraudulent forex activities. It specifically mentioned instances where USDT was used as a medium for exchanging yuan with other currencies. Chinese authorities have clarified that converting yuan into cryptocurrency for further conversion into foreign currencies, and vice versa, is considered illegal. Additionally, those providing technical support, such as website development and maintenance for these transactions, will be deemed accomplices.
The crackdown is not limited to direct participants in illegal transactions. In a notable 2019 case, a crypto trader in Dubai was sentenced to seven years in jail and fined 2.3 million yuan for illicitly exchanging over 22 million UAE dirhams into Chinese yuan using Tether. Another case involved transactions exceeding 220 million yuan using Tether between 2018 and 2021, leading to a five-year imprisonment and a 200,000 yuan fine for the developer of the payment websites. These severe punishments reflect the Chinese government’s determination to deter illegal forex activities involving cryptocurrencies.
China’s Strict Stance on Cryptocurrency
China has long maintained one of the strictest stances on cryptocurrency globally, with trading and mining activities officially banned. However, the underground cryptocurrency market in China, particularly in East Asia, remains significant. Traders often use digital currencies to circumvent regulations and profit from the arbitrage between foreign and local currencies. The recent police reports from Qingdao in Shandong province revealed a staggering 15.8 billion yuan money laundering case involving cryptocurrencies and illegal forex trading, further highlighting the urgent need for stringent regulation in this sector.
Despite the cryptocurrency ban, the Chinese government is taking a nuanced approach in drafting a national Web3 development plan, signaling a willingness to explore the potential benefits of blockchain technology while clamping down on its misuse for illegal activities. This indicates that the Chinese government recognizes the importance of embracing innovation while ensuring the integrity of its financial systems.
The joint statement from SPP and SAFE sends a clear message to those engaging in or facilitating illegal forex transactions using cryptocurrencies: the Chinese government is serious about safeguarding its financial systems and will not hesitate to take decisive action against any threats to its economic stability and security. By intensifying efforts to regulate cryptocurrency use in forex trading and cracking down on the misuse of stablecoins, China aims to maintain stability in its forex market and combat financial fraud effectively.
Chinese authorities are ramping up their efforts to regulate the use of cryptocurrencies in illegal forex trading. The crackdown on the misuse of stablecoins like Tether highlights China’s commitment to combat financial fraud and maintain stability in its forex market. With severe punishments for offenders and a nuanced approach to explore blockchain technology, the Chinese government prioritizes the safeguarding of its financial systems. As the underground cryptocurrency market in China persists, it becomes crucial to implement stringent regulations to prevent money laundering and illegal forex activities.