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China Intensifies Cracksdown on Tether in Forex Trading

Crypto | Jan 2, 2024

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Chinese authorities have intensified their crackdown on the use of cryptocurrencies, particularly Tether (USDT), in illegal foreign exchange trading

China's Supreme People's Procuratorate, in conjunction with the State Administration of Foreign Exchange, has issued a stern directive on Dec 27, 2023 against the use of Tether (USDT) as an intermediary in trading yuan with other fiat currencies.

See:  China’s CBDC: Offline Digital Yuan Payments via Super SIM Cards

This crackdown is a continuation of China's stringent regulatory stance on cryptocurrencies, which includes a major ban on cryptocurrency activities like trading and mining imposed in 2021 and comes as part of China's ongoing efforts to mitigate financial risks and maintain control over its financial system.

The Focus on Tether

The Chinese authorities have declared the conversion of yuan to cryptocurrency and vice versa as illegal, including indirect involvement such as technical support or offering exchange services. This includes using cryptocurrencies as a medium to convert yuan into foreign currencies or the reverse.  Tether, a stablecoin pegged to the US dollar, has been specifically targeted due to its role in facilitating illegal forex transactions.

Recent Cases

The prosecutor’s office cited several cases of illegal foreign exchange crime involving Tether. One notable case from 2019 involved a crypto trader who received over 22 million UAE dirhams (approximately US$6 million) from a Chinese gambling syndicate in Dubai and converted it to yuan using Tether. The trader was sentenced to seven years in jail and fined 2.3 million yuan (US$322,000).

Another case involved Zhao Dong, the founder of the over-the-counter crypto trading desk RenrenBit, who facilitated crypto and local currency trading using Tether. He was also jailed for seven years and fined a similar amount.

Outlook

Despite the ban, cryptocurrencies like Tether have remained popular in China, indicating the challenges in enforcing such regulations. Mainland China continues to be a significant market for cryptocurrencies, with underground traders often using them to exchange currencies and circumvent regulation.

See:  What’s the latest surrounding USDT (Tether) risks about?

China's crackdown on the use of Tether in illegal forex trading is a clear indication of its commitment to controlling financial risks and illegal activities within its borders.


NCFA Jan 2018 resize - China Intensifies Cracksdown on Tether in Forex TradingThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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