Chinese authorities have intensified their efforts to regulate the use of cryptocurrencies in illegal currency (forex) trading, South China Morning Post reported.
The crackdown specifically targets the misuse of stablecoins such as Tether (USDT) in unlawful transactions.
The Supreme People’s Procuratorate and the State Foreign Exchange Administration (SAFE) issued a joint statement on December 28, urging prosecutors and currency regulators to strengthen supervision.
The statement highlighted recent cases where USDT was used as a medium for exchanging yuan with other currencies.
Broader action against forex
The initiative is part of China’s broader strategy to combat financial fraud and maintain stability in the foreign exchange market. The statement from SPP and SAFE emphasized the need for local departments to work closely together to punish and lawfully handle cases related to fraudulent forex activities.
In particular, the conversion of yuan into cryptocurrency for further conversion into foreign currency, and vice versa, is considered illegal in China. Authorities have made it clear that even those who provide technical support, such as the development and maintenance of websites for these transactions, will be considered accomplices.
The crackdown is not only limited to direct participants in illegal transactions. In a notable 2019 case, a crypto trader in Dubai was sentenced to seven years in prison and fined 2.3 million yuan for illegally exchanging more than 22 million UAE dirhams into Chinese yuan using Tether.
Another case involved transactions of more than 220 million yuan using Tether between 2018 and 2021, leading to five years in prison and a 200,000 yuan fine for the developer of the payment websites.
Crypto black market
China’s stance on cryptocurrency is one of the strictest globally, with trading and mining activities officially banned. However, the underground cryptocurrency market in China, especially in East Asia, remains significant. Traders often use digital currencies to circumvent regulations and benefit from arbitrage between foreign and local currencies.
Recent police reports from Qingdao in Shandong province revealed a staggering 15.8 billion yuan money laundering case involving cryptocurrencies and illegal forex trading. These incidents underline the urgent need for strict regulation in this sector.
Despite the cryptocurrency ban, the Chinese government’s move to create a national Web3 development plan signals a nuanced approach to digital assets. It shows a willingness to explore the potential benefits of blockchain technology while addressing its misuse for illegal activities.
This recent directive sends a clear message to those engaged in or facilitating illegal currency transactions using cryptocurrencies: the Chinese government is serious about protecting its financial systems and will not hesitate to take decisive action against any threats to its economic stability and security.