Author: Xiao Sa, lawyer
Recently, several partners have contacted Sister Sa's team, wanting to inquire about the legal risks of exchanging cryptocurrencies (especially USDT) and the basic channels and practical operation methods. Today, Sister Sa's team will briefly explain the legal risks and feasibility of some current 'USDT exchange' channels to help everyone legally and compliantly use and dispose of cryptocurrency assets.
Special note: This article is aimed at ordinary users with clean sources of funds who buy and hold coins solely for personal daily consumption and normal investment activities. All methods detailed in this article are known to Sister Sa's team during their provision of legal services to clients. Sister Sa's team has no financial ties to the channels themselves, and the views expressed are solely those of one party, provided for reference only.
01. Licensed cryptocurrency exchanges in Hong Kong + broker channels for exchanging USDT
Currently, the list of licensed cryptocurrency exchanges (or operating entities) officially announced by the Hong Kong Securities and Futures Commission has reached as many as 7, with 4 licenses released all at once a few days ago, indicating the prosperity of cryptocurrency development in Hong Kong.
Based on Sister Sa's team's practical experience, currently using Hong Kong channels to exchange USDT is actually a legal and compliant method with low legal risks. However, it should be noted that currently, cryptocurrencies such as USDT cannot be directly traded on licensed exchanges and need to be traded via BTC/ETH spot channels to assist operations. Specific operations can be exemplified by HKVAX.
Behind HKVAX is the well-established brokerage 'Victory Securities' (Stock Code: 8540.HK), a fully licensed broker in Hong Kong. Before entering the cryptocurrency asset sector, they already held licenses 1, 2, 4, 6, and 9. In 2023, they also obtained licenses for cryptocurrency trading, consulting, and asset management services from the Hong Kong Securities and Futures Commission. Therefore, they can legally use Hong Kong BTC/ETH spot channels to help users exchange USDT for BTC, ETH, or other fiat currencies, with a very short transaction cycle that is basically unaffected by market financial risks. After the exchange is completed, the funds (HKD or USD) will be transferred to a Hong Kong bank account.
The advantage of this approach is its good compliance for exchanging USDT, with clear fund flows and a low probability of receiving illicit funds, and basically no frozen card risk. However, there are also disadvantages. First, current residents of mainland China cannot directly open cryptocurrency trading accounts, and using this channel may require reliable friends abroad to assist; secondly, this exchange method may require physical presence in Hong Kong (such as opening a bank account), which can be cumbersome and inconvenient for small exchanges of USDT.
02. Certain exchanges such as Some An and Some K can sell through OTC.
This method has the lowest cost and can be operated by opening an account yourself; however, it is important to note that this channel has currently become one of the easiest ways to receive dirty money. Receiving dirty money can lead not only to the freezing of bank cards and unusable funds but may also result in confiscation by judicial authorities.
If you choose this method to exchange USDT, Sister Sa's team recommends looking closely at the trading history and reviews of the counterparties, selecting highly reputable counterparts for transactions, and avoiding those with poor trading reputations or significant anomalies in their transaction records.
03. Exchanging USDT through U cards
Regarding the compliance of U cards, Sister Sa's team has specifically published an article explaining this.
Sister Sa's team | Can ordinary people use U cards? Will the U card issuers run into trouble?
Overall, there are not many issues, and some U cards can even be linked to WeChat, some yellow kangaroo, and some blue wallets for use.
However, U cards also carry risks. Currently, the most common are Mastercard or UnionPay U cards, which have relatively safe fund sources, but there are too many agents for opening cards. You can choose a reliable one that can pass KYC. Some U card service providers do indeed have instances of suddenly stopping their services. Sister Sa's team has received inquiries this year from several partners whose previously established U card service providers suddenly stopped serving users in mainland China a few months ago, resulting in funds being stuck and causing many troubles.
04. Currency exchange through coin merchants to exchange USDT
Regarding the risks of currency exchange by coin merchants, most of the risks are similar to OTC withdrawals from exchanges, and there is also the possibility of receiving dirty money, which could lead to frozen cards or being summoned as a witness. Sister Sa's team has even dealt with extreme cases where repeated exchanges with coin merchants led to being investigated as a suspect (accomplice).
Overall, the risks associated with coin merchants are relatively high. Do not easily trust so-called 'frozen card guarantees' or 'frozen card compensations.' Without a very reliable partner whom you know well, do not choose this path to exchange USDT.
05. Offline exchanges of USDT in Hong Kong
This method generally requires an overseas (Hong Kong is also acceptable) bank card. Sister Sa's team has, during their case handling, visited various offline small shops in Hong Kong to witness the process of exchanging USDT.
There are two types of physical stores in Hong Kong: one is ATMs, and the other is offline small shops. Generally, these small shops do not require customer information registration for daily transactions below HKD 120,000; you can exchange freely. For transactions exceeding HKD 120,000, simple KYC is required, and the service fees typically fluctuate around 4%.
Overall, Sister Sa's team believes that for ordinary users with clean sources of funds, buying and holding coins solely for personal daily consumption and normal investment activities, this is indeed a low-cost and convenient channel. However, there is also a risk of receiving dirty money, and it is recommended to exchange at more stable and long-operating stores in places like Mong Kok or Tsim Sha Tsui to prevent unforeseen incidents.
06. Final thoughts
It should be noted that there is currently no so-called 'completely safe' or 'perfect' USDT exchange plan. Even the consolidated solutions provided in this article still carry risks such as receiving dirty money and high transaction costs. Partners are advised to consider carefully before taking action and not to make rash decisions.