China is intensifying its scrutiny of cryptocurrency usage, focusing particularly on Tether (USDT) in foreign exchange trading. The Supreme People’s Procuratorate (SPP), the country’s highest legal prosecution agency, issued a joint statement with the State Administration of Foreign Exchange (SAFE) on December 27, aiming to reinforce measures against the use of Tether stablecoin in cross-border foreign exchange transactions.
China brands the use of Tether for exchange as illegal
The directive clearly states that utilizing Tether as a medium of exchange between local and foreign currencies is deemed illegal. Local authorities are urged to enhance coordination to combat various activities such as fraudulent foreign exchange purchases, illegal transactions, and other related criminal actions by the law. This move follows a significant cryptocurrency ban in the country over two years ago, which included restrictions on trading and mining activities. The joint statement referred to a specific criminal case involving Zhao Dong, a Chinese citizen and the founder of the over-the-counter crypto trading desk RenrenBit.
Dong was found guilty of facilitating crypto and local currency trading, resulting in a seven-year jail term and a fine of 2.3 million yuan ($322,000). His illegal activities involved using United Arab Emirates dirhams to purchase USDT and subsequently reselling it in mainland China for yuan. This recent development reflects ongoing efforts by Chinese authorities to curb cryptocurrency activities within the country. Notably, local enforcement had previously sentenced an individual to nine months in prison for purchasing 94,988 Chinese yuan ($13,067) worth of Tether in August 2023.
Cryptocurrency popularity persists in China
Despite China’s extensive crypto ban in 2021, it appears that cryptocurrencies like Tether remained popular in the country, at least for a certain period. In 2022, the Beijing Chaoyang District People’s Court ruled against the use of stablecoins like USDT for salary payments, following an incident where a firm had illegally compensated an employee using USDT. As of October 2022, reports indicated that China’s crypto market remained one of the world’s strongest, with mainland China resurging as the second top Bitcoin mining hub.
This resilience suggests that despite regulatory efforts, cryptocurrencies managed to maintain a foothold in the Chinese market. The ongoing crackdown aligns with the country’s previous ban on cryptocurrencies and reflects the government’s determination to enforce regulations in this rapidly evolving financial landscape. Despite regulatory challenges, the persistence of cryptocurrency popularity in China, as indicated by the continued strength of the crypto market, suggests that the authorities face an ongoing and dynamic challenge in managing digital assets within their borders.
China’s recent warning against the use of Tether in foreign exchange transactions underscores the authorities’ commitment to tightening control over cryptocurrency activities. This regulatory stance aligns with the country’s ban on cryptocurrencies, reflecting the government’s determination to enforce regulations in this evolving financial landscape. The continued strength of the crypto market in China indicates that managing digital assets within their borders remains an ongoing and dynamic challenge.