At the end of December 2023, a certain high court published an article titled: This price difference cannot be earned! It is an article about a criminal case that has been sentenced in 2022. The article emphasizes that the buying and selling of USDT by U merchants is equivalent to buying and selling US dollars, which is a foreign exchange transaction. Once the amount exceeds 5 million, it constitutes the crime of illegal business operation. In December 2023, the State Administration of Foreign Exchange and the Supreme People's Procuratorate also issued an illegal business case of using virtual currency for foreign exchange. The article emphasizes that the exchange of RMB-virtual currency USDT-US dollars and other foreign currencies is a foreign exchange transaction. Providing USDT as an intermediate exchange channel, and knowing it subjectively, constitutes the crime of illegal business operation.
1. Cash trading of USDT is considered illegal business operation
Before this, the cryptocurrency industry considered virtual currency a criminal offense because the money received during the transaction was stolen, which was the so-called black money. After being presumed to be subjectively aware of it, it would either constitute the crime of aiding and abetting or the crime of concealing. And from the court's public documents, that is, the online search of Chinese judgment documents, the transaction of virtual currency constitutes a criminal offense, which is only the crime of aiding and abetting or the crime of concealing.
However, in 2022, a court made the first judgment in the country on the crime of illegal business operation for trading virtual currency without receiving any stolen money or exchanging any currency, but only buying and selling USDT. After the judgment, the defendant did not appeal, so the case has come into effect.
This case is an offline cash transaction of U . The case is that on February 21, 2022, Li Si wanted to sell U , and agreed with the customer to exchange money and U in Zhongshan City, Guangdong Province. For this purpose, Li Si also specially hired a bodyguard Zhang San to escort him. Li Si and the customer exchanged about 814,000 U in cash according to the exchange rate between RMB and US dollars on that day, totaling RMB 5.1 million. As a result, Li Si and Zhang San were caught red-handed by the police when they passed the Meizhou checkpoint on their way back, and RMB 5.1 million in cash was seized on the spot.
The trial court held that Li Si and Zhang San used the form of buying and selling virtual currency to cash in foreign exchange, which was a serious case and constituted the crime of illegal business operation. Li Si was the principal offender, and Zhang San participated in the whole process as a bodyguard and was aware of it, so he was an accomplice.
Finally, Li Si was sentenced to 8 months in prison and Zhang San was sentenced to 6 months in prison for illegal business operations. The 5.1 million yuan seized in accordance with the law was confiscated in accordance with the law. Li Si's mobile phone was a tool used in the transaction of virtual currency and was confiscated in accordance with the law.
2. Does buying USDT = buying US dollars?
The simple act of buying and selling USDT cannot and should not be classified as illegal foreign exchange trading. My personal opinion is as follows:
At present, there are no laws, regulations, rules, normative documents, replies or other documents in my country that define USDT as foreign exchange.
According to my country's "Foreign Exchange Management Regulations" and the definition of foreign exchange on Baidu Encyclopedia, foreign exchange is issued by the central bank, monetary management institutions, foreign exchange stabilization funds and the Ministry of Finance, including foreign currency, foreign currency deposits, foreign currency securities, and foreign currency payment certificates. The issuer of US D T is Tether, which is just a company, not a central bank or monetary management institution. In any case, Tether cannot be considered a monetary administration authority, and US D T cannot be defined as foreign exchange.
In addition, the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" issued by the Supreme Court, the State Administration of Foreign Exchange and other ten departments on September 24, 2021 also defined virtual currency. Virtual currencies such as Tether have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed accounts or similar technologies, and existing in digital form. They are not legal tender and should not and cannot be circulated and used as currency in the market. It is very clear that virtual currency is a virtual commodity and does not belong to foreign exchange.
If the court believes that USDT is foreign exchange, it should also seek confirmation from the most authoritative foreign exchange administration before making a judgment, and send a letter to the State Administration of Foreign Exchange to confirm whether USDT is foreign exchange and whether it is a disguised foreign exchange transaction. Of course, the reply letter from the State Administration of Foreign Exchange also needs to be cross-examined before it can become the basis for the judgment. Otherwise, firstly, there is still controversy over whether U is foreign exchange, and secondly, there is no letter to the State Administration of Foreign Exchange for confirmation. It is directly determined that USDT is foreign exchange, and the sale of U is an illegal transaction crime of illegal foreign exchange trading, which violates the principle of legality of crime and punishment in the Criminal Law.
Let's take a look at the typical foreign exchange cases related to the virtual currency USDT released by the State Administration of Foreign Exchange and the Supreme People's Procuratorate. The viewpoint is that the use of virtual currency as a medium to realize the exchange of RMB and foreign exchange constitutes the crime of illegal business operation. The perpetrator uses virtual currency as a medium to earn exchange rate difference profits by providing cross-border exchange and payment services. This is to use the special properties of virtual currency to circumvent the national foreign exchange supervision, and realize the value conversion of foreign exchange and RMB through the exchange of "foreign exchange-virtual currency-RMB". It is a disguised foreign exchange transaction, and criminal liability should be pursued for the crime of illegal business operation in accordance with the law. Note that foreign currency is finally exchanged into RMB through USDT to realize exchange.
One of the views is: knowing that others are illegally buying and selling foreign exchange and providing assistance through the exchange of virtual currency is an accomplice to the crime of illegal business operations. In my country, virtual currency does not have the same legal status as legal currency, but using virtual currency as a medium to help others indirectly realize illegal exchange between local currency and foreign currency is an important link in the chain of illegal foreign exchange transactions and should be punished according to law. If the person who provides virtual currency conspires with the illegal foreign exchange transaction personnel in advance, or knowing that others are illegally buying and selling foreign exchange, and still provides substantial assistance to them to realize the conversion of local currency and foreign currency through trading virtual currency, it constitutes a joint crime of illegal business operations. Providing virtual currency trading services to illegal foreign exchange transaction personnel, but only having a general understanding of the criminal behavior assisted, and not specifically understanding the crime of assisting in the crime of illegal foreign exchange transactions, can assist in the criminal responsibility of information network criminal activities.
In short, if one needs to use virtual currency USDT to realize the exchange of foreign exchange (RMB) - virtual currency USDT - RMB (foreign exchange), and if one is subjectively aware of the other party's foreign exchange, it constitutes the crime of illegal business operation. If one has only a general understanding of assisting criminal behavior and is unaware that the other party is illegally buying and selling foreign exchange, it constitutes the crime of aiding and abetting.
3. Last
Reminder: In 2024, in addition to the criminal risks of money laundering and receiving funds for online fraud when trading virtual currencies, virtual currency-related foreign exchange gambling will also be cracked down. At the end of December 2023, the Ministry of Public Security and the State Administration of Foreign Exchange jointly issued a report on the illegal foreign exchange trading of 15.8 billion virtual currencies, which severely cracked down on foreign exchange cases using virtual currencies. In April 2024, Beijing cracked a 2 billion virtual currency foreign exchange money laundering case.
In 2024, if your trading partner is an online gambler or someone who exchanges foreign currency, there will be certain legal risks. Some online gambling platforms now require gamblers to go to the exchange to buy USDT to recharge, and when withdrawing cash, they also withdraw USDT directly, completely stripping away the bank card. If you buy and sell USDT, knowing that the other party is an online gambler, and the other party buys your USDT for gambling, you trade with him, even if it is a normal price, you will be guilty of illegal business operations, or if you know that the other party exchanges RMB for USDT, and then exchanges USDT for US dollars, you provide USDT as a medium in the middle, and the other party uses USDT to achieve the purpose of exchange, and the amount exceeds 5 million or the profit is more than 100,000 yuan, you will be guilty of illegal business operations.
