The number of cases in which buying and selling virtual currency has been charged with illegal business operations is increasing, according to lawyer Shao, based on the work situation over the past six months.
Starting at the end of 2023, various official media have continuously released typical cases of illegal business operations related to the buying and selling of virtual currency. In practice, judicial authorities across the country seem to be continuously strengthening their crackdown on such transactions.
However, many parties involved still do not understand why buying and selling USDT virtual currency can be charged with illegal business operations. They wonder why they can be convicted even if they have not received any illegal gains. They argue that they are only engaging in the trading of U and not foreign exchange. Therefore, this article aims to provide a simple explanation of the specific situations in practice.
The “illegal business operations involving foreign exchange” in the context of virtual currency trading specifically refers to the indirect buying and selling of foreign exchange (also known as “foreign exchange offsetting”). This refers to the behavior of not directly engaging in the purchase and sale of RMB and foreign exchange, but rather using methods such as repaying RMB with foreign exchange or repaying foreign exchange with RMB to achieve currency value conversion. This kind of transaction results in the funds circulating unidirectionally between domestic and foreign locations without physical flow, usually to achieve “dual-balance” through reconciliation.
The use of USDT (Tether) by U merchants or ordinary coin traders in their transactions is issued and managed by Tether Limited. As a form of cryptocurrency, it cannot be directly equated with foreign currency and the concept of foreign exchange. However, by using U as an intermediary, indirect exchange between foreign exchange and RMB is realized, resulting in currency value conversion. This is why domestic judicial authorities regard this as “indirect foreign exchange trading,” which is no longer a subject of debate.
Due to the high standards for filing this charge, it is generally difficult for ordinary individuals to commit this crime through occasional exchange transactions. Common offenders of this crime are underground money changers or U merchants engaged in arbitrage trading of virtual currency.
Even though many U merchants’ original intention is simply to profit from the price difference in arbitrage trading, they often do not realize why they are charged with “illegal business operations” due to a lack of understanding of the law. As lawyer Shao often says, the world in the eyes of U merchants is often just the “tip of the iceberg.” Therefore, next, we will understand what the “illegal business operations involving foreign exchange” is from a holistic perspective and what roles U merchants play in it.
The article goes on to explain the scenarios in which buying and selling virtual currency is used to achieve “foreign exchange offsetting” and the roles U merchants play in these scenarios. It also highlights the risks associated with these activities and concludes with the explanation that the business of profiting from the price difference is indeed very difficult.
