China to intensify crackdown on stablecoins to thwart illegal forex trading

In a bid to intensify the crackdown on crypto, China is calling for strict measures against illegal foreign exchange trading involving USDT.

China is seemingly preparing to double down on its crypto crackdown, with the Supreme People’s Procuratorate (SPP) and State Administration of Foreign Exchange (SAFE) highlighting criminal cases involving the USDT stablecoin in a recent statement, according to a South China Morning Post report.

While there have not been specific changes to cryptocurrency regulations, Chinese regulators have addressed the increasing popularity of stablecoins, which are pegged to a reserve asset such as the U.S. dollar or gold. Regulators note that digital currencies backed by fiat currencies have become a popular intermediary for yuan trading with other currencies, a move that prompted local officials to improve coordination to lawfully address fraudulent foreign exchange activities.

The prosecutor’s office particularly highlighted eight “typical cases of illegal foreign exchange crime,” with two involving USDT. In a 2019 case, a crypto trader received over 22 million UAE dirhams in cash from a Chinese gambling syndicate in Dubai, converted the corresponding yuan in China, and resold USDT for a profit of over 2%, according to the report. Another case involved the exchange of more than 220 million yuan worth of foreign currency using USDT between 2018 and 2021.

Although crypto trading and mining are officially banned in China, the industry remains quite popular in the region, as underground traders continue to use cryptocurrencies to exchange fiat currencies, the South China Morning Post says.

According to the Chinese news agency Xinhua, Beijing has cracked over 1,100 cases involving illegal foreign exchange trading, evasion, and fraud, with fines totalling 1.5 billion yuan (about $211 million) since 2021. However, the extent to which these cases involve cryptocurrencies remains unclear.