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China Intensifies Cracksdown on Tether in Forex Trading
Crypto | Jan 2, 2024
Image: Unsplash/DrawKit Illustrations
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.
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