China Urges Crackdown on Tether Stablecoin Alleging Illegal Forex Trading
China’s Supreme People’s Procuratorate (SPP) warned in a recent publication that Tether usage as an exchange medium for local and foreign currency is prohibited. The move by Chinese authorities portrays efforts to crack down on the use of cryptocurrencies such as Tether’s stablecoin USDT within foreign exchange trading.
China’s (SPP) announcement occurred two years after Beijing authorities imposed a blanket ban on cryptocurrencies. SPP constitutes the pole national agency tasked with legal prosecution across mainland China.
SPP warned Chinese nationals against utilizing USDT as the intermediary to execute trades involving the yuan and foreign fiat currencies.
China Declares Tether USDT Stablecoin Illegal
The SPP decision appeared in the Wednesday, December 27 statement jointly issued with the State Administration of Foreign Exchange (SAFE). The statement urges local officials to deploy stricter measures against the use of Tether stablecoin USDT in executing cross-border foreign exchange transactions.
The SPP-SAFE statement declared Tether utilization as an exchange medium in local-to-foreign currency transactions as illegal. The authorities directed the local branches to heighten coordinated actions towards punishing parties involved in the foreign exchange purchases via USDT they termed fraudulent.
The Wednesday statement termed all Tether-based transactions to execute foreign exchange both criminal and illegal as defined by Chinese law.
The authorities condemned all activities that involve crypto exchange against yuan as illegal. Also classified as illegal and prohibited is the indirect involvement in offering technical support towards exchange services.
The statement infused the court ruling in a criminal case where the defendant, Zhao Dong, established an over-the-counter (OTC) crypto trading platform, RenrenBit, and was found guilty.
The statement indicated that the trader leveraged the United Arab Emirates dirhams to purchase USDT, which was later resold within mainland China to obtain yuan. The Chinese national was handed a seven-year sentence besides a $322,000 fine for facilitating crypto and yuan trading.
The news of the crackdown targeting Tether stablecoin USDT comes two years after the crypto ban that mainland Chinese authorities enforced to prohibit crypto activities in the country. The blanket ban prohibits trading and mining related to crypto assets.
Chinese Agencies Heighten Crackdown on Crypto-Related Transactions
In the past two years, local agencies have religiously cracked down on transactions, including those based on Tether’s USDT. Such manifests in the sentencing of a Chinese national for nine months for buying Tether USDT worth $13,067 in August this year.
The latest move by SPP and SAFE arises from the awareness that despite the 2021 crypto ban, several cryptos, such as Tether’s USDT, remain popular in Asian countries.
The popularity grew even after the Beijing-based Chaoyang District People’s Court declared stablecoins such as USDT could not be utilized in settling salaries following a company’s move to pay an employee via USDT illegally.
However, a review of the local report indicates that China’s crypto market is among the world’s strongest. It is essential to monitor the subsequent development, given that mainland China regained the second spot as the world’s largest hub for Bitcoin mining since October last year.
Tether Remains a Prime Target in Court
Besides China, Tether stablecoin USDT has been at loggerheads with various regulatory authorities for alleged wrongdoing. It faced allegations of falsifying documents to access banking access within Taiwan and Turkey. The allegations targeted a March 2023 incident when Tether faced sudden restrictions by Wells Fargo, hindering it from operating accounts.
US lawmakers have indicated in recent years that Tether propagates illicit finance. They claim that Tether’s USDT-based transactions show trails of money laundering, terrorist financing and bribery activities. The Paul Ardoino-led issuer of the largest stablecoin by market capitalization vigorously downplayed such links.
Tether’s proof of reserves has been the subject of a class action suit recently dismissed by Judge Laura Taylor from New York’s Southern District Court. The case identified Tether and affiliate crypto exchange Bitfinex questioning the USDT stablecoin attributes. The suit alleged Tether falsely represented its USDT reserves, indicating that the cash reserves barely surpassed 4% of the circulating token.
